This document provides information on budgeting and financial goals. It discusses developing a personal budget by calculating monthly income, tracking daily spending habits, determining monthly expenses, and preparing a spending plan. The objectives are to learn how to manage money by setting financial goals, preparing a budget, and finding ways to decrease expenses and increase income. Key steps involve being realistic with goals, setting timeframes, considering constraints, and ensuring monthly income exceeds expenses. Tracking tools like spending diaries can help identify where money is going. Maintaining a positive net worth by paying bills and managing debt is also covered.

1. Smart InvestingEmmetO’Neal LibraryMountain Brook, ALBudgets and Budgeting

2. DisclaimerAndreas Rauterkus is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Andreas Rauterkus does not purport to tell or suggest which investment securities attendants should buy or sell for themselves. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.

3. ObjectivesWhat is a financial goal?Learn how to track daily spending habitsPrepare personal spending planEstimate monthly income and expensesFind ways to decrease spending and increase incomeDiscover budgeting tools to help you manage your money

4. Financial GoalsBe realisticBe specificHave a time frameInclude a dollar amountState the action to betakenSet milestones

5. Time HorizonsShort TermFinancial activities that occur within the next yearMedium TermCan be anywhere from one to five years or even ten yearsGenerally, the “not-so distant” futureLong TermFar out in the futureE.g. retiring comfortably

6. ConstraintsObstacles in the way of the pursuit of the financial goalPersonalEconomicGovernmental“Expect the unexpected”

7. Develop a budgetCalculate your monthly incomeTrack you daily spendingDetermine spending on monthly billsFind ways to decrease spending and increase incomeCreate a monthly budget

8. Calculate Monthly IncomeGross versus Net IncomeGross income – deductions = Net incomeFederal Income Tax WithholdingsMust complete Form W-4 to specify tax withholdingsIf you do not fill out a form W-4 you will most likely overpay on your taxes

10. Social Security and Medicare TaxesEmployers have to withhold social security and Medicare taxes from your wagesYour wages up to a limit are subject to social security taxes ($106,800 in 2011)The rate is 4.2% Max. contribution: $4,485.60All of your wages are subject to Medicare taxThe rate is 1.45%

11. Sample Pay Stub

12. Tracking Daily Spending HabitsTrack your expenses to avoid overspendingTry to keep spending within certain ranges for specific categoriesHousing expenses 30%Household expenses 30%Other bills 30%Long-term savings 5%Emergency savings 5%

13. Create Spending DiaryFind out where your money goes

16. Determine Monthly ExpensesExpenses are items you spend money on each monthFixed expenses Do not change from month to monthE.g. car payments, car insurance, rentVariable expensesMight change from month to monthE.g. utilities, miscellaneous expenses

17. Prepare a BudgetList your monthly income and expensesNet income needs to exceed expensesIf not, go back and revise budget until you achieve a positive net income

18. If you can’t pay your billsPay your rent and mortgage firstPay your necessary expenses nextIf you have trouble paying off your loans:Pay off loans with the highest interest ratesTalk to your creditors

19. Personal Financial StatementCreate a financial statement to track your financial conditionA personal balance sheet is called a statement of net worthList all of your assets and liabilitiesThe difference between assets and liabilities is your net worthA negative net worth is not a sustainable financial condition