BBi2O
Unit 1:
Personal
Finance
Table of
Contents
Unit 1 – Personal Finance
1.A Income Management
 Goals, Values
 Sources of Income
 Uses of Income
 Financial Planning
 Types of Expenses
Goals, Values
• Article: “I Wish Someone had Told Me …”
• Thought Exercise:
– In 5 minutes – identify 25 important things to
you right now
– Step #2 – Listen for directions …
Goal Setting
Personal Financial wellness is tied to goal
setting.
What are your top 3 goals ….
Within 1 year?
(ie by 16)
Within 5 years?
(ie by 20)
Within 10 years?
(ie by 25)
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SOURCES of INCOME
SOURCES of INCOME
• Identify and describe four sources of income
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i. Employment Income
ii. Savings
iii. Investments
iv. Social Programs
i. Employment Income
 Working to earn a paycheque
-working for a company or for yourself
(entrepreneurship)
-paid a “wage” (hourly/salary/commission/bonus)
(detailed when we get to our Human Resource unit)
 Most popular source of income for most
people
ii. Savings
• Using up money that you had previously
put aside
• By saving, you will earn interest as well
(very small amount for a simple bank
account)
iii. Investments
• Giving up your money for a chance to
earn more – an investment is something of
value that you own – you can earn money
by selling the investment or you may earn
interest from it.
• Examples: stocks, bonds, GICs, RRSPs.
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(more detail on this in 1.C – Investing)
iv. Social Programs
• Income from the government to those
who cannot work due to illness, layoff,
age, etc.
• Includes social assistance, employment
insurance (EI), disability, CPP, OSAP
(Ontario Student Assistance Program)
Income Level Factors
• Important factors of the employee:
education, experience, personal
performance, uniqueness of abilities
• Important factors of the job
marketplace: type of business, success of
business, economic conditions
Income Level Factors
• i- Education:
more education does not necessarily
mean you will be earning more money – but it does
open the door to more lucrative careers (ex. Lawyers
and doctors have high income levels and high education
levels)
• ii- Experience:
if you have more experience you
are more valuable to a company, less experienced
employees need more training which costs the company
money
Income Level Factors
• iii- Personal Performance: employees who do
their jobs well add value to a business … they are the
ones who will be considered for promotions and raises
• In a commission based job, the more you sell the more
income you will make – the better you are at your job,
the more you will earn!
Income Level Factors
• iv- Uniqueness of Ability: the types of skills
and abilities an employee has makes them more
or less valuable to a company
• The more ‘in demand’ a particular skill set is, the higher the level of
income. (extreme example – pro athletes, actors, musicians … these jobs
have very high pay because they have a highly valued and rare set of
skills)
USES of INCOME
WHAT WE MAKE VS.
WHAT YOU TAKE
HOME
• Your gross pay is the amount of money
you make before any deductions
• Your net pay is the amount of money you
have after deductions are taken off,
often referred to as “take-home” pay
uses of INcome
The money you have left is called your disposable
income. You can then choose any of the following:
•
SPENDING
•
SAVINGS
•
INVESTING
•
DONATING
SPENDING
• We use money to satisfy our needs and or
wants
• However, some of our money must be
spent on certain things. We call these
Personal Expenses.
3 types of expenses
1) REGULAR FIXED EXPENSES
- Occur on a regular basis (monthly or yearly)
and for a constant (predictable) amount.
These are often referred to as ‘bills’ and their
payment cannot be delayed without penalty.
Examples:
- Tuition
- rent/mortgage - loan repayments
- Childcare - insurance
- property tax
3 types of expenses
2) REGULAR FLEXIBLE EXPENSES
- Occur on a regular basis (monthly or yearly)
but for a variable amount.
- Also called ‘bills’ and their payment cannot be
delayed without penalty.
Examples:
-
Hydro bill
Income tax
- groceries
- recreation
- gas (car)
- phone bill
3 types of expenses
3) VARIABLE EXPENSES
- Expenses that occur on an irregular basis and
for a variable amount. These expenses can be
controlled to a certain degree by choosing to
postpone them.
Examples:
- Car repairs
- vacations
- clothing
- furniture
- home repairs
- restaurants
Budget vs.
financial plan
• A budget is a listing of income and
expenses to determine whether income
can cover expenses. It does not include a
savings goal.
• A financial plan is a forecast of how much
money is needed to achieve a given
savings goal.
Mr. Ruston’s #1
FINANCIAL RULE
ALWAYS BE SAVING!!
USES OF MONEY #2
• SAVING
• Saving for the long term future (retirement),
mid term (college/university), short term (a
special school trip) needs to be planned and
thought out
• A minimum of 10% of your income should be
saved
USES OF MONEY #3
• INVESTING
• Investing is giving away your money now
for a chance to earn more in the future.
• Popular types of investments include:
TFSAs, GICs, RRSPs, RESPs, or buying
shares on the stock market
USES OF MONEY #4
• DONATIONS
• Giving money away for what you believe
is a good reason (ex. Charities, political
parties etc.)
• The Gov’t even promotes this by giving
Donors tax credits
• Rick Mercer’s Gift Ideas- Goats! Bednets!
Budget vs.
financial plan
• A budget is a listing of income and
expenses to determine whether income
can cover expenses. It does not include a
savings goal.
Budget vs.
financial plan
• A financial plan is a forecast of how much
money is needed to achieve a given
savings goal.