Chapter 2: Budgeting Basics (Ramsey Classroom)

Successful Budgeting

1. Live on less than you make. 2. Find ways to grow your income. 3. Write a monthly budget: income, giving, saving, and spending. 4. Plan your spending and avoid impulse or unnecessary spending. 5. Stay out of debt. 6. Pay yourself first by saving. 7. Use gifts and income wisely. It must be well planned, realistic, flexible, clearly communicated

debt stress

46% of Americans report feeling stressed out by their debt.

spend

A budget give you permission to...

Zero-Based Budget

A cash flow plan that assigns an expense to every dollar of your income, where in the total income minus the total expenses equals zero. Cash flow plan that assigns an expense to every dollar of one's income: total income - total expenses = zero.

35%

Americans that actually use a budget

unexpected expense

An unforeseen cost. (accidents or emergencies)

giving

First priority in your budget

Money Personality

How you feel about money that directly affects how you develop your money plan and your attitude towards budgeting.

3 months

It usually takes this long for your budget to begin working well.

Irregular income

Money received from gifts, odd jobs, part-time hourly jobs, and so on can be budgeted through a list format.

envelop system

Series of envelopes that are divided into categories and are used to store cash for planned monthly expenses

categorizing you budget

Use as many categories as necessary to make your personal budget

monthly budget

Your guide to income and spending for the month.

Cash Flow Statement

a cash flow statement reflects on how you budgeted and spent your money after the month is over. Reflecting on your cash flow in and out over a certain period of time is critical to budgeting. A summary that shows total income and spending for a given time period.

commission

a percentage of the money received from a sale

Adjusting the budget

adjust your budget to overspending in one category by moving money from a remaining category to the over spent one.

Budgeting process

can be done on an app as well as with paper and pencil, but the app may be better.

Budgets

detailed quantitative plans through which managers decide how to allocate available money to best accomplish company goals

four walls

food, shelter/utilities, clothing, transportation

marriage and budgeting

in a marriage both partners should sit together and have a budgeting meeting

Components of a budget

income, giving, saving, spending

four types of expenses

intermittent (various times throughout the year in lump sums), fixed ( expected to occur from month to month), variable (change from month to month), discretionary (expenses for things you don't need)

financial accountability

keeping proper financial records and communicating the financial status of the operation appropriately to a trusted friend or counselor

income

money received, especially on a regular basis, for work or through investments.

net income (take home pay)

what a person earns after payroll taxes and other deductions taken out.