This document provides information on financial planning and spending plans. It discusses creating a balance sheet to track assets and liabilities, preparing an income and expense statement to analyze spending, and developing a spending plan or budget to meet financial goals. Typical spending categories are outlined along with steps in the financial planning process and benefits of planning, such as gaining a sense of security and control over finances.

1. 1.15.2.G1
“Take Charge of Your Finances”
Advanced Level
Financial Planning &
Spending Plans

2. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 2
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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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 3
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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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 4
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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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 5
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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. © 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. © 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. © 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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 9
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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. © 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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 11
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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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 12
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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. © 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. © 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. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 15
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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. © 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. 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. © 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. © 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. © 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. © 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?