1.15.2.G1
“Take Charge of Your Finances”
Advanced Level
Financial Planning &
Spending Plans
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 2
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 3
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 4
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 5
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 6
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 7
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 8
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 9
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 10
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 11
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 12
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 13
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 14
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 15
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 16
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Net Gain/Profit/Surplus or Net
Loss/Deficit?
• Net gain/profit/surplus- there is remaining money to
either save, spend or ...
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 18
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 19
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 20
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© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 21
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8.02A PF

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8.02A PF

  1. 1. 1.15.2.G1 “Take Charge of Your Finances” Advanced Level Financial Planning & Spending Plans
  2. 2. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Typical Spending Plan Pie Chart 30% 20% 15% 7% 18% 10% Housing Transportation Food Insurance Other Saving and Investing Provides guidance when creating a spending plan What variables may cause these percentages to be different?
  3. 3. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Having a plan  Financial planning - a tool used for planning ways to achieve financial goals  A continual, cyclical process of tracking, then anticipating, income & expenses
  4. 4. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 What is Financial Planning?  Make financial planning your road map on a trip to financial success!  Where are you going? (goal or destination)  What road will you use to get there? (I-85)  Will you have changes along the way? (Take a scenic byway or visit a state park)  Will you move faster through some roads than on others? (Rural or interstate)  Will there be unexpected detours? (bridge out)  What tools might you need? (to change lat tire)  Where will you stop to get fuel?  Where will you stop to eat?  Where will you stay overnight?
  5. 5. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Steps in Financial Planning 1. Identify financial goals 2. Prepare a balance sheet showing what you own & what you owe 3. Track income and expenditures for a set time period, usually a month, and record in an income and expense statement 4. Analyze amount of money earned and how it was spent
  6. 6. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Steps in Financial Planning 5. Prepare a spending plan with anticipated income and expenses to meet financial goals during the next time period 6. At the end of the time period, revise financial goals, if needed, and use the actual income and expenses to again analyze income and how it was spent 7. Prepare your next spending plan Spending Plan Development Process
  7. 7. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Benefits of Financial Planning  Learn to live within one’s means  Helps avoid financial difficulties  Have resources for one’s desired standard of living  Reduces the need to use credit  Increases sense of security  Lessens anxiety about money matters  Stay in control of finances  Become financially independent
  8. 8. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Financial Statements  Three types of financial statements are needed for financial planning.  Balance Sheet  Income and Expense Statement  Spending Plan  aka Budget
  9. 9. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Balance Sheet/Net Worth Statement  Net worth statement - describes an individual or family’s overall financial condition on a specified date - shows the assets, liabilities, and net worth of an individual or family on a set date  The components include:  Assets – Everything a person owns with monetary value  Liabilities – Debts or what is owed to others  Net Worth – the amount of money left when liabilities are subtracted from assets (indicates wealth)
  10. 10. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Sample Balance Sheet BALANCE SHEET* Date ASSETS LIABILITIES Cash Credit card balance Savings account Car Loan balance Vehicle College Loan balance Electronic Equipment Other: Total assets Total liabilities Owner's equity (Net Worth) (Total assets-Total liabilities) •Both sides of the balance sheet must be equal •Assets = Liabilities + Owner’s Equity
  11. 11. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Who is Wealthier? Juanita – earns $35,000 per year Assets Home $60,000 Retirement $24,000 Automobile $8,000 Total Assets $92,000 Liabilities College loan $6,000 Mortgage $35,000 Total Liabilities $41,000 Net Worth $51,000 Alexis – earns $100,000 per year Assets Home $75,000 Retirement $35,000 Automobile $8,000 Total Assets $118,000 Liabilities College loan $10,000 Automobile loan $4,000 Credit card debt $20,000 Mortgage $65,000 Total Liabilities $99,000 Net Worth $19,000
  12. 12. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Net Worth Activity Essential Question: What is the Net Worth Formula? _______________ - ________________ = Net Worth/Owner’s Equity Scenario 1 Taylor has assets of $189,750. Their total liabilities are $172,250. What is Taylor’s net worth?
  13. 13. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Net Worth Activity Scenario 2  Harry Stevens has assets as follows: cash in bank $18,500, IBMstock $25,000, vehicles $32,000, record collection $2,500 and artwork $1,000. Harry owes $12,500 to MasterCard, $21,750 for his mortgage. What is Harry’s net worth? Scenario 3  Malinda has the following assets: cash $32,000, savings $15,000, car $13,000. Malinda’s has the following liabilities: college loan $35,000, car loan $3,000, and Visa card $2400. What is her net worth?
  14. 14. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Income & Expense Statement  Shows income (revenue) and expenses (expenditures) for a specified time period usually a month or a year • Income - Total earnings received • Includes wages, salary, tips, commission, gifts, bonuses, interest, dividends • Expenses - Any expenditure; anything that costs money • Includes utilities, food, entertainment, transportation costs, health care, shelter, clothing, taxes • Formula: Income – Expenses = Profit/Loss  IF Income > Expenses = PROFIT  IF Expenses > Income = LOSS
  15. 15. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Income & Expense Statement  A historical type of record that serves as the basis for a spending plan  Shows whether individual/family was able to live within his/her/their means  Shows where income was spent  Shows when expenses exceed income and areas of excess expense  Shows if income was sufficient to meet expenditures
  16. 16. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Elana Rocera Income Statement For Month Ending November 30, 20xx Income Salary $3,200 Commission $1,050 Interest $45 Dividends $35 Total Income $4,330 Expenses Utilities $200 Car payment $350 Car maintenance $250 401-K $800 Insurance $750 Clothing $200 Entertainment 0 Food $300 Total expenses $2,850 Net Surplus/Deficit $1,480 Is there a Surplus or a Deficit? What is the formula to calculate surplus or a Deficit? What could Elana do with this information? Sample Income Statement
  17. 17. Net Gain/Profit/Surplus or Net Loss/Deficit? • Net gain/profit/surplus- there is remaining money to either save, spend or invest • Net loss/deficit - an individual is spending more money that he/she is earning and has to use credit (borrowed money) to meet their financial obligations
  18. 18. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Profit/Surplus or Loss/Deficit Business What is the basic financial (profit) formula? ______________ - _______________ = Profit/Loss Business 1 Taylor’s Grocery Store revenue for this year is $91,750. The owner noticed an increase of $3,000 in the store’s expenses. She determined that total expenses equal $81,000? Will this business net a profit or loss? _______ How much profit or loss? ________
  19. 19. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Profit/Surplus or Loss/Deficit Business Business 2 Harry’s Shoe Store has noticed a significant increase of revenue of $123,000. The manager has also determined that the total expenses equal to $128,000. Will this business net a profit or loss? _______ How much profit or loss? ________ Business 3 Malinda’s Auto Dealership of Imported Cars made $895,000 in revenue. The accountant determined total expenses equal to $598,000. Will business net a profit or loss? _____ How much profit or loss? ________
  20. 20. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Profit/Surplus or Loss/Deficit Individual Family 4 The Breck family had income of $71,250 this year. The family spent $81,000. 1. How much profit or loss? ________ 2. How do you think they took care of this financial situation in the short term? Family 5 Mr. Hennessee earned $72,000 and Mrs. Hennessee earned $44,000 last year. Their stock earned $1000 in dividends. Mr. Hennessee totaled all expenses for the family equal to $109,000. 1. What is their total family income ? 2. How much is the surplus or deficit?
  21. 21. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.15.2.G1 Profit/Surplus or Loss/Deficit Individual Family 6 Last year Jimmy earned $54,000 in salary and commission @ 2% of $185,000 sales Jimmy spent $45,987. 1. What is Jimmy’s total income? 2. How much Surplus or Deficit does Jimmy have? 3. What changes might Jimmy make to his budget (spending plan) because of this information?

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