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  1. 1. Budgeting and Recordkeeping
  2. 2. Terms <ul><li>Disposable income – money you have left to spend or save after taxes have been paid </li></ul><ul><li>Financial plan – orderly program for spending, saving, and investing the money you earn. </li></ul><ul><li>Budget – spending and saving plan based on your expected income and expenses </li></ul>
  3. 3. More Terms <ul><li>Fixed expenses – costs you are obligated to pay at specific times, regardless of other events. </li></ul><ul><li>Variable expenses – costs that vary in amount and type, depending on events and the choices you make. </li></ul>
  4. 4. More Terms <ul><li>Assets – items of value that a person owns </li></ul><ul><li>Liabilities – amounts of money owed to others </li></ul><ul><li>Net Worth – Assets less liabilities </li></ul><ul><li>Net Worth = Assets - Liabilities </li></ul>
  5. 5. Budgeting and maintaining financial records are a significant part of financial planning and provide the road map to financial security.
  6. 6. Financial Planning helps you do the following: <ul><li>Determine and evaluate your options for using your money. </li></ul><ul><li>Make sure you use your limited funds for the things you want most. </li></ul><ul><li>Prevent careless and wasteful spending. </li></ul><ul><li>Organize your sources of income so that you can maintain a plan of personal financial fitness. </li></ul><ul><li>Avoid money worries by planning your saving, spending, and borrowing to stay within your means. </li></ul>
  7. 7. A BUDGET must balance. Money coming in (earnings) must equal money going out (spending plus saving).
  8. 8. Preparing a Budget <ul><li>Estimate total expected income for a certain time period. Include all money you expect to receive. You may use weekly, biweekly, or monthly. </li></ul><ul><li>Decide how much of your income you want to save. Financial experts advise saving at least 10 percent of your disposable income each pay period. </li></ul>
  9. 9. <ul><li>Estimate your expenses, or money you will need for day-to-day purchases—for example, lunches, fees, personal care items, and clothing. </li></ul><ul><li>Balance your budget. </li></ul><ul><li>If expenses exceed income, you must adjust your plan. </li></ul>Sample Budget
  10. 10. Personal Records <ul><li>Good personal record keeping makes budgeting and long-range planning easier. </li></ul><ul><li>Records also form the basis for completing tax returns, credit applications, and other financial forms. </li></ul>
  11. 11. You should keep: <ul><li>Income and Expense records </li></ul><ul><li>A statement of net worth </li></ul><ul><li>Personal property inventory </li></ul><ul><li>Tax records </li></ul>
  12. 12. <ul><li>Records of Income </li></ul><ul><li>W-2 statements </li></ul><ul><li>Payroll check stubs </li></ul><ul><li>Statements from banks showing interest earned on savings </li></ul><ul><li>Statements from investment companies showing dividends from stocks </li></ul>
  13. 13. <ul><li>Records of Expenses </li></ul><ul><li>Charitable contribution receipts </li></ul><ul><li>Receipts from medical bills </li></ul><ul><li>Work-related expense receipts </li></ul>
  14. 14. <ul><li>Statement of Net Worth </li></ul>Total $9,300 Assets minus liabilities $7,400 Net Worth Total Assets $9,300 Inventory attached 5,000 Personal property: Total liabilities $1,900 Car value 3,000 Loan from mother 100 Savings account 800 Loan on car $1,800 Checking Account $ 500 Liabilities Assets Net Worth Statement Nygen Phomn January 1, 2004
  15. 15. <ul><li>Personal Property Inventory </li></ul><ul><li>List all valuable items you own, along with purchase prices and approximate current values. </li></ul><ul><li>Personal property includes anything of value inside your home—clothing, furniture, appliances, etc. </li></ul><ul><li>Photograph items of value. Make video of furnishings. </li></ul><ul><li>Keep list in safe place (safe-deposit box) </li></ul>
  16. 16. <ul><li>Tax Records </li></ul><ul><li>Keep copies of tax returns, W-2 forms, and other receipts verifying income and expenses listed on tax returns for at least three years. </li></ul><ul><li>Records should be kept in safe place in the event of an audit. IRS has legal right to audit tax returns for three years from date of filing of return (longer if fraud or intentional wrongdoing on your part can be proved). </li></ul>
  17. 17. <ul><li>THE END </li></ul>