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Barbara O’Neill, Ph.D. CFP®moneytalk1@juno.com
   Discuss reasons to have a spending plan   Discuss common errors in spending plans   Discuss strategies to improve ca...
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Case Example:At the age of 21 (1933), Woolworth heiress BarbaraHutton (1912-1979) had almost $50 million at herdisposal. M...
   To determine where money is currently being spent   To decide where to spend your money in the future   Helps you sa...
 No   allowance for large, irregular expenses Unrealistic   figures Vague   expense categories   No allowance for the ...
Summary of income and expenses for a given period  Positive Cash Flow: Income > Expenses  Negative Cash Flow: Expenses >...
 Increase income Decrease expenses Do bothAnalogy: weight control (diet, exercise, both)                               ...
 Adjust  tax withholding/use tax benefits (EITC) Add a second job or work overtime Start a small business Increase/col...
Taxes are deducted from your paycheck are based on your W-4 form                                                    11
0 allowances = max taxes deducted* =                        Smaller take home pay =                     Larger tax refund ...
 Housing Food Transportation Clothing Utilities Other   expenses                     13
 It’s   not just about giving up pricey coffee It’s     about “finding” money to save by  reducing everyday expenses Wh...
 $5   a day = $1,825/year $10   a day = $3,650/year                              15
 Budget      = Spending Plan Avoid   the “Three Cs”    Cut back    Cut out    Can’t Avoid   the “Three Ds”    Denia...
 Add   up take-home income Total   fixed expenses (e.g., rent or mortgage) Total   flexible expenses (e.g., food, cloth...
Source: Personal Finance by Garman & Forgue, Houghton Mifflin   18
 Mental    Budget     Appropriate if financial resources and responsibilities      are limited Physical    Budget     ...
Envelope/Mvelope Method                                                   Cash from                                       ...
 Put   a set amount into savings Do   regularly – each pay View   savings as a FIXED expense It’s not what you earn; it...
1.   Write a check each payday and deposit     in savings account (or transfer automatically)2.   Use payroll deduction to...
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 Set    SMART goals with a time deadline and a price Example: “Save $8,000 toward the down payment on a new car in 4 year...
 Personal   beliefs about what is important Guide   how people spend time Guide   how people spend money Examples:   ...
Source: Personal Finance by Garman & Forgue, Houghton Mifflin   26
Short-Term-   Under 3 yearsMedium-Term-    3 to 10 yearsLong-Term-    10 or more years                                 ...
http://njaes.rutgers.edu/sshw/                                 28
 Health: Decrease portion sizes of favorite foods by 1/3 to 1/2 and/or increase exercise    Eat half as much as you do n...
 Health:        How many hours of exercise are needed to burn off extra food?    Is eating a certain food “worth the cal...
• Don’t cut out something completely• Find a less expensive alternative                                      31
 Paymore on Ramp  up physical     outstanding credit activity               card balances Workup to 10,000      Automa...
“People don’t plan tofail…they fail to plan”A spending plan helps you takecharge of your money                           33
“Happiness is positivecash flow”                    34
“There is noindependence quite soimportant as livingwithin your means”          Calvin Coolidge, U.S. President           ...
Thank you for your participation.Be healthy, wealthy, and happy.                                    36
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How Does Your Cash Flow?

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How Does Your Cash Flow?

  1. 1. Barbara O’Neill, Ph.D. CFP®moneytalk1@juno.com
  2. 2.  Discuss reasons to have a spending plan Discuss common errors in spending plans Discuss strategies to improve cash flow Discuss how to prepare a spending plan Discuss how to manage large irregular expenses Discuss financial goals in a spending plan Discuss simple behavior change strategies Q and A 2
  3. 3. 3
  4. 4. 4
  5. 5. Case Example:At the age of 21 (1933), Woolworth heiress BarbaraHutton (1912-1979) had almost $50 million at herdisposal. Married seven times, she lived above herconsiderable means. She died at age 66 in a LosAngeles hotel with about $3,500 to her name. 5
  6. 6.  To determine where money is currently being spent To decide where to spend your money in the future Helps you save money Puts you in control of your financial future 6
  7. 7.  No allowance for large, irregular expenses Unrealistic figures Vague expense categories No allowance for the unexpected No allowance for inflation 7
  8. 8. Summary of income and expenses for a given period  Positive Cash Flow: Income > Expenses  Negative Cash Flow: Expenses > Income Total cash Cash outlays Cash received - during time = surplus or during time period deficit period 8
  9. 9.  Increase income Decrease expenses Do bothAnalogy: weight control (diet, exercise, both) 9
  10. 10.  Adjust tax withholding/use tax benefits (EITC) Add a second job or work overtime Start a small business Increase/collect child support/alimony Access public benefits Sell assets Upgrade job skills Charge adult children room and board Bartering Other? 10
  11. 11. Taxes are deducted from your paycheck are based on your W-4 form 11
  12. 12. 0 allowances = max taxes deducted* = Smaller take home pay = Larger tax refund + allowances = less taxes deducted = Larger take home pay = Smaller tax refund* Can add extra withholding beyond “0” allowances; e.g., +$50 more) 12
  13. 13.  Housing Food Transportation Clothing Utilities Other expenses 13
  14. 14.  It’s not just about giving up pricey coffee It’s about “finding” money to save by reducing everyday expenses What are your “lattes”?  _______________  _______________  _______________  _______________ 14
  15. 15.  $5 a day = $1,825/year $10 a day = $3,650/year 15
  16. 16.  Budget = Spending Plan Avoid the “Three Cs”  Cut back  Cut out  Can’t Avoid the “Three Ds”  Denial  Deprivation  Don’t 16
  17. 17.  Add up take-home income Total fixed expenses (e.g., rent or mortgage) Total flexible expenses (e.g., food, clothing) Pro-rate (1/12 per month) occasional expenses Include money for emergencies Include money for financial goals Balance the bottom line: income = expenses Take action! 17
  18. 18. Source: Personal Finance by Garman & Forgue, Houghton Mifflin 18
  19. 19.  Mental Budget  Appropriate if financial resources and responsibilities are limited Physical Budget  Envelopes, folders or containers Written Budget  On notebook paper Computerized Budget  Spreadsheet or specialized software Online Budget  Examples: www.mint.com and www.mvelopes.com 19
  20. 20. Envelope/Mvelope Method Cash from paycheck = $1,200Mortgage Gas Electrical Vehicle Groceries Savings Misc. $400 $25 $75 $100 $150 $75 $25 Medical Gifts Donations Taxes Education Vacation $90 $25 $25 $125 $75 $10 Sum of Envelopes = $1,200 Sum of paycheck is equal to sum of envelopes 20
  21. 21.  Put a set amount into savings Do regularly – each pay View savings as a FIXED expense It’s not what you earn; it’s what you keep! To become wealthy, “act your wage.” Better still, live below your means. 21
  22. 22. 1. Write a check each payday and deposit in savings account (or transfer automatically)2. Use payroll deduction to deposit a certain amount into savings (direct deposit)3. Save loose change4. Automate investment deposits 22
  23. 23. 23
  24. 24.  Set SMART goals with a time deadline and a price Example: “Save $8,000 toward the down payment on a new car in 4 years” Buildthe required savings amount into your spending plan as a fixed expense 24
  25. 25.  Personal beliefs about what is important Guide how people spend time Guide how people spend money Examples:  family togetherness  religion/faith  job success  education 25
  26. 26. Source: Personal Finance by Garman & Forgue, Houghton Mifflin 26
  27. 27. Short-Term- Under 3 yearsMedium-Term- 3 to 10 yearsLong-Term- 10 or more years 27
  28. 28. http://njaes.rutgers.edu/sshw/ 28
  29. 29.  Health: Decrease portion sizes of favorite foods by 1/3 to 1/2 and/or increase exercise  Eat half as much as you do now…gradually  Take leftovers from restaurant meals home Finances: Reduce discretionary spending by 1/3 to 1/2 and/or increase income  Spend less than you do now  Look for less expensive options 29
  30. 30.  Health: How many hours of exercise are needed to burn off extra food?  Is eating a certain food “worth the calories?” Finances: How many hours of work are needed in order to buy something (use after- tax dollars)?  Is buying something worth the time worked? 30
  31. 31. • Don’t cut out something completely• Find a less expensive alternative 31
  32. 32.  Paymore on Ramp up physical outstanding credit activity card balances Workup to 10,000  Automatically steps/day increase savings at regular intervals Increase fruits and vegetables in diet  Add 1/12 of mortgage payment Domore of anything (P and I) monthly positive!  Domore of anything positive! 32
  33. 33. “People don’t plan tofail…they fail to plan”A spending plan helps you takecharge of your money 33
  34. 34. “Happiness is positivecash flow” 34
  35. 35. “There is noindependence quite soimportant as livingwithin your means” Calvin Coolidge, U.S. President 35
  36. 36. Thank you for your participation.Be healthy, wealthy, and happy. 36

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