NEFE Financial Planning Program

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NEFE Financial Planning Program

• Unit 3Budget Dont Go Broke!

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CAN YOU BELIEVE?

• Teens earn about 5.70 per hour and work about 15
  hours per week, for a weekly paycheck of over
  80.
• In 1998, the average teenager earned almost
  2,300 for the year.

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• Teenagers in the U.S. spent over 155 billion in
  2000.
• Teen girls spend about 91 per week, while boys
  spend about 87.
• A little over 1/3 of teens receive a regular
  allowance, and about 20 of teens have a job.

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• 22 of teens have a checking account.
• Almost 60 of teens follow a 50/50 plan half of
  any money received is spent, and the other half
  is saved.

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I. OVERVIEW WHAT IS A BUDGET?

• Cash is to personal financial planning as gas is
  to your car.
• A budget is a plan for managing money during a
  given period of time.

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• Income is any money coming in.
• Gross income is the total amount of income from
  your wages or salary before payroll deductions.

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• Payroll deductions are the amounts subtracted
  from gross income, which results in your net
  income.
• Payroll deductions are usually taxes, but as you
  grow older youll find there are other deductions
  as well, such as health insurance and retirement
  savings.

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• Taxes are fees placed on income, property, or
  goods to support government programs.

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• Generally, there are four common payroll
  deductions. They are
• Federal income tax
• State income tax
• Social Security tax (FICA)
• Medicare tax

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• Federal income tax is a fee for the support of
  federal government programs.
• State income tax is a fee paid to the state
  revenue department to support state programs. (no
  state income tax in Texas!)

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• FICA stands for Federal Insurance Contribution
  Act.
• Social Security tax funds FICA, which provides
  old-age, survivors, and disability insurance.
• Medicare taxes are used to fund the hospital
  insurance under the FICA program.

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• Subtracting deductions from your paycheck leaves
  you with net income, also called your take-home
  pay.

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• The federal government form that tells your
  employer how much to withhold from your paycheck
  for taxes is the W-4.
• The lower the number of deductions you take, the
  higher the amount of taxes withheld, and vice
  versa.

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EXAMPLE 1

• You select 3 deductions on your W-4, resulting in
  10.00 per month being withheld from your check
  (120.00 per year).
• The next April the IRS says you owe 100 for your
  taxes for the year.
• You get a 20 refund!

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EXAMPLE 2

• You select 5 deductions on your W-4, resulting in
  5.00 per month being withheld from your check
  (60.00 per year).
• The next April the IRS says you owe 100 for your
  taxes for the year.
• You have to pay the IRS 40!

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• You always fill out a W-4 when you start a new
  job, but you can change it whenever you want.

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• The form that you receive from your employer by
  January 31st of each year showing an earnings
  summary and taxes withheld for that year is
  called a W-2.
• The W-2 is used to file your income taxes each
  year no later than April 15.

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• Expenses are the money you spend on your needs
  and wants.
• Two basic categories of expenses are fixed and
  variable.

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• Fixed expenses are amounts that are the same
  every time.
• Variable expenses can change, which means you
  usually have more control over them.

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• Cash management is also referred to as cash flow.
• A budget is your roadmap to achieving your goals.
• The two main parts of a budget are income and
  expenses.

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• P.Y.F. stands for pay yourself first and is a
  plan for saving.

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• Some ways to be a good shopper are
• Shop sales
• Online auctions
• Coupons
• Garage sales
• Thrift stores

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II. OTHER TOOLS TO HELP YOU HANDLE YOUR CASH.

• A checking account is an essential tool for
  handling cash.

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• When you need money you have several options
• Write a check
• Use an ATM card
• Use a debit card

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• It pays to shop around when opening a checking
  account. Watch for
• Minimum balances
• Annual or monthly fees
• Overdraft protection
• Insufficient funds charges
• ATM fees

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• The envelope system can be used until you have a
  checking account.

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• A good record keeping system will include keeping
  the following
• Checking account statements
• Savings and investments statements
• Insurance papers
• Tax documents
• Pay stubs
• Loan papers
• Big-ticket item receipts warranties

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• Write two steps you can take this week to improve
  your own financial habits
• 1.
• 2.