A budget is a financial document used to project future income and expenses to determine if a person or company can continue operating at projected levels. It allows you to understand where your money goes, make spending decisions, reach financial goals, and eliminate surprises. Creating an effective budget requires identifying monthly income and expenses, setting short- and long-term goals, and tracking your progress toward those goals. Budgeting, saving consistently, and paying yourself first are important tools for building financial security and reaching your financial objectives.

1. A Budget: What is it?

3. A Budget is a tool to help you understand where your money goes

4. A Budget allows you to decide how much and when you spend your income.

5. A Budget allows you to make and reach your financial goals

9. Identify your monthly expensesRule of Thumb: If your monthly income is greater than your monthly expenses then you are able to save $$$$$$ MI > ME = $avings If your monthly expenses are greater than your monthly income then you are going into debt. ME > MI = Debt

14. Get your debt under control

15. Save for a deposit on a car or home

16. Save more for retirement

17. Save for a holiday.

20. Value after five years: $300 interest + Principal [$1,000] = $1,300

21. Value after ten years: $600 interest + Principal [$1,000] = $1,600

22. Value after 12 years: $720 interest + Principal [$1,000] = $1,720Note*: Simple Interest does not take into consideration bank fees, changes in interest rate or any other matter that may influence the interest gained. “Simple Interest” calculation is to give you a general idea where the ‘value’ of your initial “Principal amount” will be in a set time frame.

23. A Budget:What is it? ‘Rule of 72’ is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. Choice of Rule: The value 72 is a convenient choice of numerator, since it has many small divisors: 1, 2, 3, 4, 6, 8, 9, and 12. It provides a good approximation for annual compounding, and for compounding at typical rates (from 6% to 10%). The approximations are less accurate at higher interest rates. For continuous compounding, 69 gives accurate results for any rate. This is because In(2) is about 69.3%. Since daily compounding is close enough to continuous compounding, for most purposes 69, 69.3 or 70 are better than 72 for daily compounding. For lower annual rates than those above, 69.3 would also be more accurate than 72. Formula: How many years to double is: 72/’fixed annual rate of interest’=‘Years to double your money’ It works like this: Take 72 divided by the interest rate you will earn on your money. The answer equals the number of years it will take your funds to double in value. Example @4%pa: 72/4(%) = 18 (years to double your money) Example @10%pa: 72/10(%) = 7.2 (years to double your money)

24. A Budget:What is it? ‘Compound Interest’ Compound interest is paid on the original principal and on the accumulated past interest. Formula to find interest for fixed term deposit: A = P(1 + r)t A = is the amount of money accumulated after t years, including interest. P = is the principal (the initial amount you borrow or deposit) r = is the annual rate of interest (percentage) t = is the number of years the amount is deposited. You have $1000 at a rate of 5%pa for 3 years A=1,000(1+5%)3 A=1,000 x (1+0.05)3 A=$1,157.63 You have $1000 at a rate of 5%pa for one year A=1,000(1+5%)1 A=1,000 x (1+0.05)1 A=$1,050

26. Pay yourself first, use automatic deductions.

27. Put your savings into a separate account that does not have ATM access.

28. Put any pay raises, bonuses or tax refunds into savings after you complete your emergency fund.Don’t pay the minimums on credit cards. Don’t live without emergency savings. Don’t spend more than you earn. Set financial goals. Budget each pay packet. Determine which categories you will pay in cash. Pay with cash and keep receipts. Don’t be tempted by debit cards.

29. A Budget:What is it? Assembled by: A. Ballas