Budgeting

1
Lesson 8-1

• Budgeting Record Keeping

2
Importance of Financial Planning

• Disposable Income-Money you have left to spend or
  save after taxes.
• Financial Plan-is a set of goals for spending,
  saving, and investing money you earn.

3
Financial Plan

• Helps you to
• Determine and evaluate options for your money.
• Prioritize your options so your money goes as far
  as possible.
• Avoid careless and wasteful spending.
• Organize your financial resources so you can
  achieve your goals.
• Avoid money worries by planning your savings,
  spending and borrowing to live with your income.

4
Preparing a Budget

• First step in achieving your financial goals!
• Budget- a spending and saving plan based on
  expected income and expenses.
• Money coming in must equal money going out.

5
Steps in Preparing a Budget

• Estimate your total expected income
• Decide amount to save for future needs
• Estimate your expenses or day today needs
• Balance your budget

6
A Typical Monthly Budget

• Variable Expense- Costs that vary in amount and
  type depending on choices you make
• Grocery bill, eating out, buying clothes.
• Fixed Expenses- costs you pay at specific times
• Rent or mortgage, car loan, utility bills
• Have no more than 50-60 of income be fixed
  expenses.

7
Personal Records

• Should keep 4 types of records
• Income and Expense Records
• Net worth statement
• Personal property inventory
• Tax Records

8
Records of Income Expenses

• Income Record Example
• W2 forms
• Statements from banks savings and investments
• Expenses
• Receipts listing charitable contributions,
  medical bills,
• These serve as documentation of income and
  expenses for tax purposes
• Store these items in a safe place.

9
Net Worth Statement

• List of items of value you own
• Assets-things you value you own
• Liabilities (or debt)- money owed to others
• Net Worth- difference between assets and
  liabilities
• Solvent- assets are greater than liabilities,
  called favorable financial position
• Insolvent- owe more than own, called poor
  financial position
• Will need to get loans or credit
• Banks want you to be solvent

10
Personal Property Inventory

• List of all valuable things you own, along with
• Anything of value such as clothing, furniture,
  computers, cameras and appliances
• In the event of a fire, theft or property damage
• Do this for insurance company
• Take photos and inventory
• Keep information in a safe place
• Review and up-date yearly

11
Tax Records

• Should keep tax records for at least 3 years in
  case of an audit.
• Includes return form, W2 form, other receipts
• Keep in a safe place

12
Lesson 8-2

• Legal Documents Filing System

13
Contracts Agreements

• Contract- A legal enforceable agreement between 2
  or more parties
• Common legal agreements credit plans, mortgages
  and rental agreement
• Express contracts- can be oral or written in
  words
• Credit card application, leases
• Implied Contracts- unwritten agreements
• Riding Bicycle and obey traffic laws

14
Elements of an Enforceable Contract

• Binding-everyone who enters into contract must
  follow by its terms.

15
To be legally binding must do the following

• Agreement- is valid when an offer is made and
  accepted
• Counter offer-occurs when one person changes any
  part of the original contract
• Must be accepted or rejected by first person
• Click-on acceptance-occurs on internet
• Voluntary intent to be bound
• Consideration-anything of value exchange as party
  of a contract
• Maybe money, object, promise, or performed
  service
• Each party receives something of value
• Contractual Capacity-competence of the parties
• Competent-means legally capable of agreeing
• People under 18, mentally handicapped cannot be
  held to contracts
• Legality-legally enforceable in court of law
• Notarized- receive a seal that says the person
  signed the documented on their own free will

16
Consumer Responsibilities in Agreement

• 7 responsibilities as a consumer
• Fill in all blank spaces
• Write clearly
• Enter dates, amounts and other numbers correctly
  clearly
• Be sure the seller tells you all the relevant
  info
• Understand all terms in the agreement, dont sign
  unless you have read it
• Make sure no changes have been made
• Keep a copy for your records in a safe place

17
Negotiable Instruments

• Unconditional written promise to pay a sum of
  money upon demand
• Ex Checks and promissory notes
• Promissory note-written promise to pay a certain
  sum of money to another person or holders of note
• Maker
• Person who creates and signed the note and agrees
  to pay
• Payee
• Person whom the note is made payable to
• Co-signer
• Person who promises to pay the note if the maker
  fails
• Minors and people who dont have established
  credit need these.

18
Warranties

• Also called guarantee
• Is a statement about a products qualities of
  performance the seller tells the buyer
• If the product fails the sells agrees to fix the
  problem
• Maybe in writing or assumed to exist
• All products contain implied warranties
• Warranties will protect against normal wear and
  tear

19
Filing System for Personal Records

• Good filing system will help organize, store and
  retrieve needed information.
• Paper filing system
• Typical home uses folders and labels and a file
  cabinet
• File things alphabetically

20
Electronic Record Keeping

• Advantages of computerized
• Ease of up-dating
• Ease of storage and retrieval
• Speed of making comparisons
• Spreadsheets
• Organizes data in columns and rows and can
  perform calculations
• Database
• Organizer data for easy search and retrieval