2. What will you learn in this
chapter?
• What is a budget and why is it important to have?
• What income sources can you consider?
• What expense categories can you plan with?
• How to manage your cashflow?
3. PLANNING IS BRINGING
THE FUTURE INTO THE
PRESENT SO THAT YOU
CAN DO SOMETHING
ABOUT IT NOW.
- Alan Lakein
Words to Ponder
4. How much income
do you get?
A budget is a spending plan for a month or a year.
How much do you spend?
The more your understand where your money comes from and goes to the more
control you have over it.
This way you can make smarter decisions each day!
5. • Housing
• Transportation
• Food
• Utilities
• Medical & Healthcare
• Saving & Investing
• Debt Payments
• Personal Spending
• Recreation & Entertainment
• Miscellaneous
INCOME
EXPENSE
• Salary
• Comission
• Selling something you own
• Providing services or products
• Investment and interest
• Allowance
• Gifts
• Scholarships and Grants
6. As-is budget
Describes your current earning and spending
habits.
To-be budget
Prescribes how you want to change your
earning and spending habits in the future
7. Salary
Earned from a job. This is
based on worked hours.
Investment and
interest
Your assets earning
money for you.
Providing services
or products
Creating art to sell,
mowing the lawn, etc.
Scholarships and
Grants
Money you can get from
the goverment or your
school
Comission
Earned from a job. This is
based on results and not
hours worked
Allowance
Money you regularly get
from your family.
Selling something
you own
Selling your old clothes,
phone or laptop.
Gifts
Money you get for events
from your family.
INCOME
SOURCES
8. Disposable income
The amount of money you have after taxes
deducted.
Discretionary income
The amount of money you have after
taxes and essential expenses are
deducted.
9. List all income types you
get in a year!
Which of your incomes
come monthly, which
annually?
Is your income already after taxes?
How much disposable income do you have in a month?
11. WHAT IS THE
IDEAL SPLIT
FOR SPENDING
CATEGORIES?
Must have,
essential expenses
Savings and
investments
Personal wants,
non-essential
expenses
<50%
20%
30%
12. List all the
expense
categories that
you spend on!
How much do you
spend on each
category in a
month?
Do you have any
additional annual
expense? (e.g.:
gifts)
13. A monthly budget is an effective tool that will help you…
A: Spend a larger share of your earnings now.
B: Manage your spending and save for the future in order to accumulate wealth.
C: Keep your transportation costs low by purchasing a new car every few years.
D: Select stocks that are more likely to increase in value over the long run.
In which order should you allocate your budget to spending categories?
A: First the must have expenses, than the nice to have expenses, what is left is savings.
B: First put aside savings, then spend on anything.
C: First the must have expenses, then 10-20% in savings and last on enterntainment.
D: Select stocks that are more likely to increase in value over the long run.
How much should you spend on essential expenses?
A: As much as I need to.
B: Ideally less than 30% of disposable income.
C: Ideally 50% or less of discretionary income.
D: Ideally 50% or less of disposable income.
18. > Always spend on necessities
first
> Spend on your wants only
after your needs are covered
> Treat savings as a necessity
> Aim to have at least 3-6
months of expenses in an
emergency fund
> Stick to your budget and
follow your plan
Impulse purchases
Spending more than you can
afford
Covering your expenses
regularly with credit products
Living paycheck to paycheck
Thinking credit cards and
loans are free money
BEST PRACTICES
BAD HABITS
<
<
<
<
<
19. Keep your cashflow positive!
Key Process
Aim to put 20% of your income towards
savings and investment!
Have a strong emergency fund, ideally 3-6
months of expenses!
Spend less than 50% of your
income on necessities!
Keep debt to income ratio under
30%!
20. ASSIGMENT
Create a monthly
to-be budget!
Consider first your income with
the following questionnaire!
Plan your expenses in
the following template!
21. What different source of income can you plan with?
How can you increase your current income?