Budgeting and Saving Money | Consolidated Credit
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We are Consolidated Credit Counseling Services and we help people like you become financially fit everyday. From getting you out of debt to keeping you out of debt we cover it all. In this presentation we cover the ground rules for budgeting and saving money! Gain knowledge and prepare yourself for financial success.
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Budgeting and Saving Money | Consolidated Credit
- 1. Budgeting & Saving! Learn to make the most of your money!
- 2. Who We Are We are a nonprofit, nationally recognized, HUD approved credit and housing counseling agency.
- 3. How Do You Become Financially Fit? • Evaluate relationship to money • Examine what is important to you – NEEDS versus WANTS • Set personal goals – Going to college – Financial security – Paying back student loans – Owning your own home – Well deserved vacation
- 5. The First Step to Achieve Goals • Determine your feelings about money, spending and budgeting • Reality Check Be honest with yourself!
- 7. Budgeting “A Budget is restraining and limits my freedom.” Not so! It does the opposite. It puts you in control and helps you achieve your financial goals.
- 8. Goal Setting • Realistic • Specific • Limited in time • Actionable
- 9. Reasons Personal Budgets Fail • Failure to prioritize expenses • Failure to budget practically for normal out-of-pocket expenses like groceries and gas • Failure to plan for the unexpected • Spending more money than you make
- 10. Expenses to be Budgeted The Unexpected • Medical bills • Vehicle repair and maintenance • Electronic replacement
- 11. Expenses to be Budgeted Monthly • Rent or mortgage payments • Car payments • Credit card payments • Utilities – Water and Electric – Cable – Internet – Phone
- 12. Expenses to be Budgeted Weekly • Food • Personal Care - clothing, bath and beauty, toiletries • Transportation - bus, gasoline • Savings
- 13. Expenses to be Budgeted Discretionary expenses • Books and magazines • Entertainment • Dining and snacks • Vacation and travel • Impulse purchases
- 14. What is a Spending Plan? A spending plan can help you manage your money more effectively, live within your income limits, reduce your reliance on credit, and save for the things you want.
- 15. Spending Plan Concepts • Gross Pay vs Net Pay – Base your spending plan on your take-home pay • Know what you spend – Create a spending diary and log every transaction for a month • Make Trade Offs • Decide how much to Save • Be Realistic and Flexible
- 16. Spending Step-by-Step • Pay your monthly bills • Set aside the money you’ll need for your weekly and day-to- day expenses • Put money into savings • Set aside money for larger expenses you know are coming • If you begin to earn more, increase the amount you save as much as you can
- 17. Savings Goals • Your emergency fund should be anywhere between 3 to 6 months of what you make • Save up to pay for Christmas gifts for family and friends • Save up for vacations
- 18. Ways to Save • Pay yourself first • Auto pay from your paycheck into savings account every month • Review insurance coverage/deductible • Groupon/Coupons • Use a different savings and checking account
- 19. Choosing a Bank • Location • Fees • Services of a Bank: – Checking Accounts – Savings Accounts – ATMs – Loans • Home Loans • Car Loans • Business Loans • Credit Cards
- 20. Credit Unions • Owned by the people • Non-for-Profit • Is it convenient? – Is it local? – Will you have access to the same services?
Editor's Notes
- Our mission is to assist families throughout the United States in ending financial crisis, and solving money management problems through education and professional counseling. WHAT WE DO Free Credit and Budget Counseling Debt Management Services Housing Counseling Financial Education
- Before we start, let’s take a moment to talk about our relationship with money. Does anyone in here work part time at all? Or have you? (if someone does, I’ll ask what they do.) When I was about 12 years old, my mom dropped me off in front of a mechanic’s garage and said to me, ‘Okay, you’re going to spend your whole Saturday here, cleaning up this man’s auto shop. At the end of the day, he’s gonna give you 20 bucks.” Now looking back, I realize that was really a poor deal on my part. But back then, I was really excited. That meant that every two or three weeks…I could get myself a new video game! And to a 12 year old geek, that was a big deal! But, I spent every dollar I made. At 14, I told my mom I wanted a cell phone and faster internet. Back then, we had this monstrosity known as dial up. If you’ve never used it, be grateful. So she had me fill out an application and work at Publix every weekend so that I could learn to pay bills. I was pretty excited! Not only could I have my own phone…but I was making WAY more than I was at the garage! It was about $5 an hour. Sounds… not great right? But to me… that was so much more than I had been making, so I could do so many more things! I worked at Publix all throughout high school. I went to the movies some times twice, some times three times a week. I ate out for every meal and I happily spent every dollar I made. That is all very true. That was who I was. So, can anyone tell me what I did wrong? Show of hands? Correct answer: I spent every dollar I made. If someone says it: Yes! I didn’t save anything. I spent everything I had on fast food and comic books. When it came time to go to college, I had no idea where the money was going to come from! That was my relationship to money. It wasn’t very good. I didn’t understand it. I made poor choices. I didn’t differentiate between what I NEEDED and what I WANTED. I only cared about what I wanted. I didn’t set any goals at all. None. I didn’t think about college, I just figured I’d do it when the time came. Let me tell you, when the time came… it was very hard.
- So tell me, do we all know what is a need and what is a want? A need is something that you absolutely need… a want is something you don’t! That being said… Starbucks… need or want? Want… you don’t need to spend $1000 on a small coffee! Cell Phone Bill … need or want? Need… let’s be honest with each other, home phones are gonna be gone sooner than later. At this point, I consider a cell phone to be a need. Mani/Pedi … need or want? Want … your fingers or toes will not fall off. So you get the idea. They say on average, Americans spend about $7 a day on nothing. Coffee, snacks, basic items. That adds up to about $2500 a year. Wouldn’t you like to have an extra $2500 a year?
- The first step toward achieving your goals is to determine your feelings about money, spending and budgeting. Make sure you are honest with yourself. You have to want to take control so that you can set up for your future.
- We’re going to talk now about budgeting. Let me clarify exactly what a budget is. A budget is basically a list of the money you make and what you spend it on. It is a tool that allows you see where your money is going every month and how you can improve it. By keeping a strict budget, you can regulate how much money you can save, which will build your wealth. Not having a budget, or not understanding how to use a budget is one of the number one reasons why people struggle with money. Now, obviously I recognize that many of you are still a bit young to be have a household budget. But it is not a bad idea to get into the habit for when you are older.
- Many people feel constrained by a budget. Uncomfortable because they feel like they HAVE TO obey the budget and never waiver. Or they feel like they have no room for fun. That is not true at all! In fact, the point of making a budget is to help you meet your financial goals! Let’s do an example. Let’s say you have a goal. You want to save $1000 by the end of the year. But, you can never seen to put any money away. It’s time to figure out why you don’t have any extra money. So, we write down how much money you make a month. Now, we subtract the things you spend your money on. $120 a month for gas… $100 a month for car insurance… $50 for internet… so on, so forth. We eventually get to entertainment and personal expenses. You notice that you spend $50 a month between hair care and nails, $30 a month going to the movies, $200 a month Eating out. Well look at all that money that can be reduced! If you cut down those numbers by even a little, you can save it away until you’ve reached your $1000 goal!
- Who knows the difference between a dream and a goal? Anybody? My uncle always had a saying. .. Among many… one was, “A Goal is a Dream with a time stamp.” A goal… is a dream… with a time stamp. Example, my dream is to be a super hero in a movie. That will always be my dream. But it probably won’t happen because I don’t like working out and I don’t like California. But my goal is to save $5000 by this time next year to put towards my home purchase. That goal has a time stamp attached to it. It is all realistic. It is something very specific, that I can obtain in a reasonable period of time. By looking at my budget, I realized I spend WAY too much on craft stuff. I like to craft. Looove to craft. But I’m not making money on my hobby as of yet, so therefore I need to cut back on how much I spend on that stuff.
- So let us talk about some reasons why Budgets can fail. Sometimes, people will put their wants before their needs. That causes things to spiral out of control and before you know it, you’re eating ramen noodles and asking the gas station for $2 worth of gas. I’ve been there, it happens when you’re not careful! Not building yourself a cushion for emergencies. People neglect this. Anyone here have a dog or cat? I’m a dog person. I have three. My little one got sick last week. It cost me $300 bucks to take her to the doctor. That is a lot of money to pay all at once out of nowhere! Imagine if that happens and you have nothing set aside… now, you’re taking that money away from your food, or car payment or phone payment. Spending more than you make… on average, they say Americans spend $1.30 for every $1.00 they make…. Doesn’t sound good does it? But that is a true statistic. It is important to NOT be that guy.
- When you are preparing your budget, it is very important to set money away for an emergency fund. Emergencies are the fastest way to clear out a bank account, because you never see them coming. It doesn’t need to be a huge amount that you put away, but it needs to be something. There are a number of things that could happen… Sickness, injury, breaking your glasses, any thing medical is always unexpected. If you don’t have insurance, or if you have not so great insurance, that means you have to pay for this. Vehicles. They break down. Accidents happen. Repairs are costly. You need to be prepared for that if you have a car, or when you get one. Electronics. Who here drops their cell phone? I drop mine ALL THE TIME. Nearly constantly. I don’t even know how it still works. One day, the screen is going to shatter and I am going to have to replace it. Like I’ve told you guys, I’m a big geek. I love my computer. I’m on it a lot. Last year … it just stopped. Just… no ones home, lights are off… see ya later. I don’t want to tell you how much it cost me to get a new one because I may start to cry a little, and none of you want to see that. But thankfully, I had enough of an emergency fund set aside to handle it.
- This section is the most important part of budgeting. The regular, monthly expenses. Now of course, I recognize that some of these do not currently apply to you guys. But I will at least touch on them so you are aware of them. Monthly expenses include: (list) Eventually, you will have to pay for rent or mortgage payments. They will always come first, and always be one of your largest bills. So your budget will always account for this first and foremost. Car payments will likely be the next largest thing you budget for. If and when you get a credit card, you will need to make sure they are paid on time every month. Utilities include things like water and electric, cable, internet, and phone bills.
- This is one part of the budget where things will not always be the same. You will not always spend the exact same amount on food or gas. But try to estimate. If you think you spend ABOUT $100 a month on gasoline, you’d say that. It doesn’t have to be perfect. This is also one of the first parts of the budget that you can try to make adjustments if necessary. Food, for example. I told you earlier, I love to eat man. See I have this delusional notion that I am like, Chef Ramsey or something. But I often forget… I don’t make Chef Ramsey money. So at the end of the month, I look at my budget and what I SHOULD be spending on food…and then I realize that I cook myself these huge intricate dishes that way too much! So, I know that this is the area that I can make cuts. Personal care. This is another huge area that adds up quickly. New shoes, new clothes… even if you shop thrifty, they add up! Going to the salon, hair and nails, these things are expensive if you make them regular. An average mani/pedi session can cost $25-$30 a pop. Some girls go every week. That could be more than a hundred dollars a month for something you can do for free at home. Think about it. It’s hard to make cuts on what you spend on Gas or transportation. It really is. Generally, this amount will likely be similar every month. Savings. Another thing my uncle always used to tell me was “Pay yourself first”. Savings is just that. I consider this somewhat separate from your emergency fund… a savings is more for when you are ready for a big thing, like a new car. Do whatever you can to contribute to this fund. Even if its just $10 or $20 a week. You won’t miss it. Most people waste that on junk food and coffee.
- Discretionary expenses are “wants”. They are things you don’t need to account for. Entertainment, fun stuff. It is good to make a section for these types of spending's in your budget so you know where your money is going. An example, snacks. If you buy a soda and a candy bar from the vending machine every day, you’re spending easily $750-$800 a year that could be put in your savings! If you like to eat out, the simplest change can save you money. Drink water with your meal instead of a soda. It may sound really petty, but $2-3 for a drink adds up. Lets think about a place like Chili’s for example. A classic hamburger at Chili's is about $9.50. A soda is about $2.70. That means that just for lunch or dinner, after tax, you’re now up to $13.00 for a plain hamburger. Plus tip. That is $15 or $16 for a burger and fries! Paying $3 less for that meal may not seem like a lot… but if you eat out every day, or several times a week… we are right back at the $700-$800 a year number. Movies and entertainment…. That’s another place I am just the worst. I love to go to the movies. But they’re not cheap! If you find you are going to the movies too often, you may want to cut back.
- Making a spending plan is the next step after a budget. Your budget is like the rough draft of a paper. The spending plan is how you flesh out the paper. Where you make the fine touches. This is how you determine how to change your budget. So lets talk about a few concepts of the spending plan to get a better idea of how it works. Then, we’ll talk about easy ways to figure out how to change it. Remember that there’s a difference between your income — the total amount you earn — and your take-home pay, or net income. Gross Pay is the amount you are being paid before taxes. So, if you are offered a job making $30,000 a year… YOU the employee will not actually have $30,000 a year because of taxes. When you receive a paycheck, Uncle Sam likes to take his first. It’s just the way it is and it isn’t fun. So, when you are budgeting and creating your spending plan, you can’t count on your Gross pay because you don’t get all of it. Net pay is what you take home. So, a $500 paycheck can easily dwindle down to under $400 after taxes. That number is what you want to work with because you WILL have that money. Spending Diary: To get a clear picture of how you actually spend right now, it may help to keep a spending diary for a month or two. Write down every transaction you make. Keep receipts. Be very detailed! You will be extremely surprised when you realize where your money is going! Use this as a tool to see what you can cut. Trade offs: Make trade offs. Some times, you’re going to run into a situation where your income does not support your budget. We call that being in the red. It means you spend more than you make. And it is VERY common. But what do we do to fix that? Bills and fixed expenses are hard to change, so you need to look at other places. Basically, when money is tight its time to see where you can make compromises. There is nothing wrong with buying Publix brand over name brand on food items, or shopping at Walmart for your groceries. If it comes down to gas in your car or a gym membership… maybe it is time to watch some home-work outs on YouTube. Earlier we talked about saving. While it is important, it is something that can be flexible. It is up to you how much you save. Just make sure you are consistent. Flexible: Create a spending plan you can live with. Be realistic and flexible. The trick is to live within your income so that you can pay your expenses but still have some money left-over for your own flexibility. Review your plan every month. Adjust it as your income and expenses change.
- With an emergency fund, the goals you want to try to accomplish, are for it to be about 3-6 months of what you make. So if you make $1000 a month, you want to aim for $3000-6000 in an emergency fund EVENTUALLY. Why? Because what if you lose your job? It isn’t easy to get a new one. What if you’re injured and out of work for a month? Or your car breaks down? Save up for Christmas gifts early. Start in the summer. $20 a week. Stick it in an envelope and you’ll have a couple hundred by December. That way, you can get your friends and family what you want to. Same with vacations. If you want to take a spring break trip, or grad bash, start saving up months in advance.
- Simple ways to save are always the best ways. Pay yourself first, simple as that. You are the most important person. Have an autopay deduct $10 a week from your check and put it into savings. Or $20 or however much you want. Review your car insurance. Can you get a good driver or good student discount? They may offer it. You could try to save some that way. Groupon is another way people can save. It’s not always great, but it can help from time to time. Or, google oil change coupons, they ALWAYS have them. Look for deals. Buy one get one deals are all over. Shop smart and save! If you’re going to set up a savings/emergency fund…. Separate it from your checking account. Having two different accounts will help to regulate what is going on. A Savings account can keep your money safe, help you save up for larger items and plan your goals.
- Choosing a bank is tough. Nowadays, if you are going to have a job, most companies will require you to do what is called Direct Deposit. Does anyone know what direct deposit is? Show of hands? Direct Deposit, is when your paycheck is automatically deposited into your bank account on weekdays, so that you don’t need to be handed a physical paper check. So that means it is time to look for a bank. The great thing about large banks, is they are insured by the federal government. So, you are protected in case cowboys, super villains or banditos decide to rob your bank. But because everything is electronic now, the bank-robbing-bandito population has dwindled. It’s important that you choose a bank that is very close to you, and convenient to get to. Some times, however, this can bite you in the butt. Is anyone here looking to go away for college? Out of Florida? Where ever you go, make sure they HAVE your bank. I bank with Chase. A few years back I was in Pennsylvania for a week…and did not know that they don’t have Chase… It made life pretty frustrating. When choosing a bank account plan, make sure you look out for fees. If you’re a student, most banks won’t charge any fees for an account. They may want you to open both a checking and a savings account, which we’ve talked about. That’s a great idea. Also, see if you’re able to get a bank account that does not charge over draft fees. Mistakes happen, especially when you are new to the game. An over draft is when you accidentally spend more than you have. This can sometimes result in a $35 fee. Some banks won’t charge a fee though, if you have a savings account. See if you can find that. Let me briefly discuss the services of a bank… Checking accounts are where your money is located. The most basic account. It is attached to a debit card. You swipe your debit card and money is deducted from your account. A Savings account is where you store you emergency fund or long term money. On some accounts, the bank will give you what is called Interest. Which is a small amount of money added to your savings just for storing money there. An ATM is a machine that allows you to withdraw or deposit cash into your account. Be warned! If you use an ATM from a bank that isnt your bank, it will cost you a fee. Loans: I wouldn’t worry about these yet… but, through a bank, you can get Credit Cards, Car Loans, Business Loans and Home Loans. This is money you borrow that you have to pay back.
- You may also want to research credit unions. A credit union is a cooperative financial institution, owned and controlled by the people who use its services. The difference between a bank and a credit union is that credit unions are nonprofit institutions and are not in business to make a profit like regular banks. You should make certain that the credit union you are researching is convenient for your banking purposes. Some times credit unions do not have the same services as a bank. They may not have a mobile app, or convenient ways to deposit money. They also typically wont have many locations. Keep all this in mind.