Building: Knowledge, Security, Confidence Borrowing Basics FDIC Money Smart for Young Adults.
Building: Knowledge, Security, Confidence
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Building: Knowledge, Security, Confidence
Setting Financial GoalsFDIC Money Smart for Young Adults
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Purpose
• Learn how to manage money by preparing a personal spending plan
• Identify ways to decrease spending and increase income
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Objectives
• Track daily spending habits
• Prepare a personal spending plan or budget to estimate monthly income and expenses
• Identify ways to decrease spending and increase income
• Identify budgeting tools that will help you manage your money
By the end of this course, you will be able to:
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To make a Budget or to NOT Make a Budget?
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What is a Budget?
Budgeting is:
• An important step to financial security
• About choices – choosing how to make and spend money
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Why Budget?
Usually for
1 month
Usually for
1 month
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Preparing a Budget
Budgeting is about:
• Choosing how to use your money
• Knowing what your income and expenses are every month
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Four Steps to Preparing a Budget
1. Keep track of your daily spending
2. Determine what your monthly income and expenses are the month before they are due
3. Decrease spending
4. Increase income
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Step 1: Keep Track of Daily SpendingMany people spend all their money—Do you know where your money goes each month?
• Have you ever had any money and then spent it?
• Do you remember exactly what you bought?
Control Your Money!• Know where your money
goes• Keep a personal spending
diary
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Set Your Goals
Consider them when planning a budget:
• Be realistic
• Be specific
• Have a time frame
• Say what you want to do
• Have milestones
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Daily Spending Diary
Watch Spending Closely
• Use a daily spending diary or log
• Know where your money goes
• Cut expenses to save for goals
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Activity 1: Daily Spending Diary
– Write down what you spend in a typical day
– Keep track of everything you spend
Complete Activity 1 in your Participant Guide
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Step 2: Income
Income comes in the form of:
• Allowances• Wages from a job• Miscellaneous work (like cutting
grass)• Interest and dividends from
investments
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Expenses: items you pay for each month
• Housing and car payments
• Insurance• Food and clothing• Utility bills• Personal, child or
pet care
Step 2: Expenses
• Eating out or other entertainment
• Educational costs
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Activity 2: Monthly Income and Expense Worksheet
– Your instructor will explain how to fill in the worksheet
– You will fill it out as you go through the section
Complete Activity 2 in your Participant Guide
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What You REALLY Earn: Income
• Your employer must subtract certain taxes from your paycheck
• The time it takes to meet goals for saving may increase
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Gross Income: Total income without deductions
Net Income: Gross income after deductions or subtractions, such as Social Security and other taxes
What You REALLY Earn: Income (continued)
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Social Security: Insurance for someone who works
• Retirement
• Disability
• Family
• Survivor
• Medicare
What You REALLY Earn: Income (continued)
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Expenses
Expenses: Everything you pay for in a time period
There are two types of expenses:
– Fixed
– Flexible
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Fixed Expenses do not change• Car payment• Rent
Flexible Expenses might change• Electricity• Food• Clothing or entertainment
Expenses (continued)
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Step 3: Find Ways to Decrease Spending
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• Carrying little cash and controlling your credit card use
• Not shopping “for fun”
• Remembering your savings goals
• Buying only what you need
• Paying your bills on time to avoid extra fees and charges
You can decrease spending by:
Step 3: Find Ways to Decrease Spending
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Step 4: Find Ways to Increase Income
• Get a second job or a job that pays more to increase income
• Use certain tax credits that can help you increase your income (or pay fewer taxes so that you get more in your paycheck)
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Budgeting Tools
These help you manage your budget:
• Monthly payment schedule
• Monthly payment calendar
• Computer system
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We will focus on two:• Monthly payment
schedule• Monthly payment calendar
These help you:• Record income in advance• Plan ahead to pay your
bills
Budgeting Tools (continued)
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Activity 3: Monthly Payment Schedule
– Use the Income and Expenses Worksheet
– Follow your instructor’s directions to complete the Schedule
Complete Activity 3 in your Participant Guide
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Activity 4: Monthly Payment Calendar
Use the Monthly Payment Schedule to fill in your
calendar
Complete Activity 4 in your Participant Guide
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Monthly Payment Calendar
Month________________________________
Sunday Monday Tuesday Wednesday
Thursday Friday Saturday
1 2$400 paycheck$25 savings$150 car$25personal$30 insurance
3$16600 transportation
4 5$25 interest (income)
6$30 cell phone
7
8 9 10 11 12 13 14
15 16$40 phone bill
17 18 19 20$10 credit card/ loan
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22 23 24 25 26 27 28$40 entertain-
ment
29 30
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Help! I Can’t Pay My Bills!
Scenario: You add up your bills and the total is $900, but your income is
only $600….
What do you do?
Think about the bills that would
be the most important!
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Help! I Can’t Pay My Bills! (continued)
If you have to choose, think of major obligations first:
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Activity 5: A Hole in Todd’s Pocket
Read the scenario and think about what Todd did
Complete Activity 5 in your Participant Guide
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CONCLUSION: To make a Budget or to NOT Make a Budget?
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Setting Financial Goals
• How to track what you spend each day• How to prepare a personal budget to
estimate monthly income and expenses• Ways to decrease spending and
increase income• About tools for better money
management
Congratulations! You have completed the Setting Financial Goals module. You have learned:
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Assess Your Knowledge
Don’t forget to complete the Knowledge Check in your
Participant Guide