Unit 2 - Budgeting: Making the Most of Your Money Did you Know? In 2001, the average American teen...

Unit 2 - Budgeting: Makingthe Most of Your Money

Did you Know?

In 2001, the average

American teen spent $104 per

week.

NEFE High School Financial Planning ProgramUnit Two – Budgeting: Making the Most of Your Money


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Assignment

Part1 – Pie ChartUsing your recently created Spending

Log, create categories of expenses and calculate the percent you spent on each category

Use that information to create a pie chart that represents how you spent your money

Answer questions on handoutPart 2 – Values and Spending


Reasons for a Spending Plan …Helps you determine where you

are spending your money currently.…Helps you decide where to spend

your money in the future. …You have an organized way to save

for things that cost more. …Puts you in control of your financial

future, beginning NOW.


Knowing How Much You SpendHelps you create a BUDGET

What is a Budget?A plan for managing your money

during a given period of timeIncome - Expenses


IncomeAny money you receive

Where do most teens get their money? 62% part-time employment, summer job, or

neighborhood jobs (i.e. babysitting)


Your Paycheck

If you earn $12.00/hour and work for 40 hours a week, how much money will you take home?

Expect at least 20% to be taken out for taxes!

Federal Income Tax

Social Security

Medicare

State Income Tax


Taxes

Federal and State Income Taxes – fees collected by the federal/state government to support its programs; sent to the IRS/state revenue department

Social Security – provides a small income and other services to the elderly

Medicare – provides medical insurance to the elderly


Income

Gross Income Total amount of income from your

wages, before any payroll deductions taken out

# of hours worked x rate per hour

Net Income Gross Income – taxes or other

deductions Take-home pay


Sample Paycheck


Expenses

What you spend money on; your needs and wants3 main types of expenses: Fixed Variable Periodic or Occasional


Expenses

Fixed - costs the same amount every timeRent, Car Payment, Cable bill, etc.

Variable – fluctuate in amount; usually have more control over how much they’ll beFood, Electric bill, etc.

Periodic or Occasional expenses – you don’t pay every month, and can be either fixed or variableCar Insurance due every 6 monthsAuto repairs


The Most Important Expense

P.Y.F. – Pay Yourself First!Saving is an all-important part of

reaching your financial goalsWhenever you receive money, you

should immediately put a certain amount into an account that you will set aside to use later to meet a long-term financial goal


Sample BudgetVeronica’s Monthly Budget

Estimated Income: Paycheck (after taxes) $2,100Interest Earned 50Total Estimated Income:

$2,150

Fixed Expenses:

Savings (P.Y.F) $500Car Payment 325Rent 750Cable TV/Internet 75 Estimated Variable Expenses:

Utilities 150Food 200Gas 100 Periodic Expenses:

Car Insurance ($300/6 months)

50

Total Expenses

$2,150

Total Income $2,150 - Total Expenses 2,150 $ 0


Top 10 Budgeting Tips

1. You need a budget, even if you don’t want one.

Budgets are the most practical way to regain control of your finances. They take some work and disciple, but they pay off in spades.

2. You can make a budget in 3 steps.▪ Keep track of your current spending for a time,

categorize and total your spending, and then track it to make sure it doesn’t exceed the limits you impose.



3. Be careful with cash If you find that you have no idea where

your cash is going after you visit the ATM, consider tracking cash spending better.

4. Live within your means It may seem simple, but don’t spend

more than you make



5. Understand the difference between a want & a need

Sometimes the things we think we “need” are better classified as luxuries. ie) drinking a mocha latte every morning when you could brew coffee at home.

6. Take 10% off the top. Pay yourself first. Every paycheck, put 10% aside for you. This

way, you will never spend more than 90% of your income.



7. Let your computer do the work. There are great software programs out

there to make budgeting less of a chore.

8. Don’t obsess. Focus on the big picture.



9. Don’t count your eggs before they’re hatched.

Windfalls are nice, but you can’t depend on them. Big tax refunds, end-of-year bonuses, or investment returns are not guaranteed.

10. Don’t let your spending creep up. As you make more money, don’t spend

more.

NEFE High School Financial Planning ProgramUnit Two – Budgeting: Making the Most of Your MoneyNational Lampoons Christmas Vacation


People Without a Budget…

…Are less likely to know what they have.

…Have no plan, often coming up short before their next paycheck or allowance.

…Are almost certain to have no plan to save for more expensive spending goals.


QuestionsDoes it makes sense to create and

live within a budget when you don’t have a lot of money?

What if you find that you are consistently spending more in one area than you had planned to?

What if you find that you can’t live within your budget?

Unit 2 - Budgeting: Making the Most of Your Money Did you Know? In 2001, the average American teen...

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