Budgeting

paychecks

Decide how much money is needed to cover expenses (fixed and flexible) each month; divide this by the number of __________ you receive in the month.

income, expenses

If you cannot meet your expenses, you must look at your __________ and __________ and make the necessary changes.

5%

Savings should be considered a fixed expense at __________ of your income.

maturity

The ability to plan purchases and stick to a budget is a sign of __________.

how much money you have to spend AND plan on how to spend responsibly

To be financially literate, what do you have to know?

-envelope system -tally system -tracking with your check register -the budget spreadsheet -personal finance software

What are the five ways to stay on track with your budget?

compare your income to your expenses; if your income is greater than your expenses, you are fine; if income equals expenses, you will meet your obligations; if income is less than expenses, you will not have enough money for your obligations

What happens after you total up all expenses and all expected income?

to meet all of your financial commitments and pay for all your basic needs; in addition, you may have financial goals to purchase certain items; next, you should list your goals with an estimate of the cost of each

What should be our basic goal when setting up a budget?

make a list of items and services you buy and what they cost; this list reflects your spending patterns

What should you do after you estimate your expenses for the time period of your budget?

-it helps decide priorities -to better understand your financial status -allocates your income so you can purchase what you need and want -helps eliminate wasteful spending -gives people control over a very important part of their life -leads toward harmony in a home; financial problems is one of the major causes of divorce

Why should we plan a budget?

Written

__________ records make it easier to keep track of your spending and staying within your budget. Keep it simple!

budget

a plan to help you help manage your money wisely; it will help you reach your short term, intermediate, and long term goals in a timely fashion

flexible expenses

costs that occur repeatedly, but vary in the amount each month; clothing, food, entertainment, hobbies, etc.

periodic expenses

expenses that occur over time and differ in amounts; car, repairs, gifts, vacation, new computer, etc.

personal finance software

if your computer skills are more advanced, there are software programs that can help you monitor your budget; they also can help you track money in various accounts, as well as provide summaries of your loan and credit card balances

tally system

in this method, you keep a tally of your spending categories and save your receipts; then at the end of the day or week, you enter the amounts on the receipts below the amount budgeted for each category

tracking with your check register

in this process, you can use your check register to track all your income and expenses as you write checks and withdraw money; as you spend cash, make a note of what and how much you spent

unearned income

money you did not work for such as interest, dividends on stocks, prizes, gifts, etc.

earned income

money you get for doing some type of work; salary, wages, etc.

fixed expenses

set amounts that you are committed to pay; mortgage, rent, car notes, installment payments, pledged contributions, and insurance

income

Be sure to count only the __________ you are sure to receive; do not include over-time, gifts, etc.

net

Be sure to work with your __________ pay when developing your budget.

flexible

A budget should be __________. When you need to change it (it just isn't working or circumstances change)...change it!

-set spending goals -list your sources of income along with how much money you receive from each source during the time period you have selected for your budget; weekly, monthly -estimate your expenses for the time period of your budget -total up all expenses and all expected income -put your budget in writing -evaluate your budget every few months to see if and where you need to make changes

What are the steps to setting up a budget?

-fixed expenses -flexible expenses -periodic expenses

What are the three types of expenses?

earned income & unearned income

What are the two types of income?

the budget spreadsheet

in this system, you can create a worksheet with all your budget information using a spreadsheet software; each time you receive or spend money, enter the amount in the appropriate cell for that category and update the totals

envelope system

this is a very simple system where you label a separate envelope for each of your expense categories; when you get money, you distribute it among the envelopes based on how much is needed for that expense each month