Establishing Healthy Financial Habits

Personal Finance

The Share, Save, and Spend System● Share, Spend and Save- Involves

dividing your funds into three categories.○ It is a balanced approach that helps you look

at money in terms of your own personal values systems.

Sharing and Saving

● Sharing can mean buying Christmas presents, donating to a charity, etc.

● Saving involves putting away for short-term, medium-term, and long-term goals○ Short-term: buying an ipod○ Medium-term: going to college○ Long-term: starting a family or buying a

house

● Buying everyday items such as food, gas, clothing, etc.

Sharing, Saving and Spending● When you put spend last in the Share,

Save, Spend System you are putting less emphasis on your everyday wants. ○ You will soon staying learning to use phrases

such as. “I cannot afford that right now” or “No I do not need that”

Values

● Before you can begin setting up your financial planning system you need to think about your own values○ What parts of your life deserve the most

attention?

Cause and Effect

● What happens if you blow your whole paycheck?

● What happens if you pick up an extra shift?

● What happens if you get a speeding ticket?

Your Financial Plan

● Step 1- Determine your current situation○ Analyze how you use money now.○ Coming to terms with how you have spent (or

overspend) money in the past can be a powerful lesson.

● Step 2- Set and prioritize your goals○ Decide what goals you have for the short,

medium, and long term○ Your goals should be specific, measurable,

and realistic.○ Determine which goals are most important to

you

Your Financial Plan

● Step 3- Develop a long-term plan○ Think about how you can work towards your

goals.○ Make sure your plan is something you can

do without a lot of trouble.

● Step 4- Organize your records○ Come up with a way to organize your bills,

bank records, and other paperwork.○ Use Excel, a notebook, and make sure you

keep important documents

Your Financial Plan

● Step 5- Set up a budget○ Your budget should reflect the three R’s

■ Reality■ Responsibility■ Restraint

○ It should be doable and should reflect your values

● Step 6- Keep it simple○ People who achieve their financial goals keep

their plan simple○ Make sure your plan is easily trackable

Income vs. Expenses

• Money coming in is income

• Money going out represents your expenses

• Determine your incomeo Jobso Allowanceo Gifts

When projecting your budget, be realistic about your income.

Income vs. Expense

A good way to evaluate your spending is to keep track of your expenses for a month

Date Item or Service Purchased at Cost Category

May 11 Latte Mug Shots $4.42 Food

May 12 Haircut Barber Shop $20.00 Grooming

May 12 Movie Cinema 16 $9.00 Entertainment

May 15 Bus Pass City Bus $35.00 Transportation

Income vs. Expense

After you had made a detailed list or log of your spending for a month, you can put each item into a category

Category Week 1 Week 2 Week 3 Week 4 Total

Sports $24.00 $32.00 $21.00 $27.00 $104.00

Food $13.00 $20.45 $16.10 $18.00 $67.55

Clothing $0 $0 $40.00 $8.00 $48.00

Grooming $0 $20.00 $0 $0 $20.00

Entertainment $9.00 $21.75 $9.00 $18.00 $57.75

Transportation $0 $35.00 $0 $0 $35.00

Grand Total

$332.30

Income vs. Expenses

• After creating this detailed list or log, you will have a much better picture of how and where you spend your money.o Ask yourself

Did my spending reflect what is important to me?

Two years from now, which of these purchases will still mean something to me?

What percentage of my spending is for necessities?

Keeping Records and Paying Taxes• Financial Records include a variety of

documents such as bank statements, receipts, vehicle ownership papers, contracts, insurance papers, employment records, tax records, and bills.o These should be kept on file for 7 years.

Filing Systems

• Paper documents are best kept in file folders and can be organized a few different wayso Alphabeticalo Numberical o Chronological

• Computer Basedo Many banks and other financial institutions

provide online access to your accounts

Online Safety

• Most online financial service providers are safe to use. However you should always be safe and follow the basic ruleso Keep a hard copy of your recordso Do not give out personal informationo Never click on links sent in an emailo Regularly update your operating system,

firewalls and antivirus softwareo Read the privacy policies of companies before

you click accept.

Taxes

• Taxes- represents all the money that people pay to their local, state, and federal government to fund government programs

o Federal Taxes- Medicare, Medicade, Education, the Military, roads and other public projects.

o State Taxes- Fund the same sorts of programs and projects as the federal government

o Local Taxes- Go towards Fire and Police departs, schools, parks, and community services

Types of Taxes

• Sales Tax- You pay when you make a purchase

• Property Tax (real estate tax)- You pay on the land and homes that you own.o Personal Property Tax- You pay on items such

as cars, boats, certain services like hotel rooms and car rentals.

Types of Taxes

• Estate Tax- You pay when you for inheritance money

• Income Tax- You pay out of your paycheck, this is figured as a percentage of a person’s earnings.o Everyone pays income tax on the money they

earn

o Gift Tax- Tax paid on gifted money, o More than $14,000. You will pay taxes.

Income Tax

• When you start any job you will have filled out a form which is called a W4 form.o This form helps you and your employer figure

out how much money to withhold from each paycheck

• Withholding- the money that is taken out of your paycheck to pay taxes, Social Security, and any additional fees.

Forms

• W4

• 1040

• 1040EZ

Social Security Tax

• Social Security Tax- Covers the federal program that people pay into while they are workingo This money pays for disability, retirement,

and life insurance benefitso New law affect the amount of money you end

up paying into the system and the amount you will collect when you retire decades from now.