STATEMENT OF FINANCIAL
POSITION AND INCOME
AND EXPENSE STATEMENT
ADVANCED LEVEL
2.2.3.G1
AGENDA
• Primer:
What is Net Worth?
an Asset?
a Liability?
• Statement of Financial Position
• Income and Expense Statement
• Net Worth Activity
© Take Charge Today –August 2013– Statement of Financial Position – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
3 MONEY MANAGEMENT TOOLS
Statement of
Financial Position
What is my
financial position
today?
Income & Expense
Statement
Spending Plan
How have I
managed my
money in the past?
What is my future
money
management plan?
Work together to help you objectively
evaluate your past, present, and future
financial decisions
Reach net
worth level
desired
© Take Charge Today –August 2013– Statement of Financial Position – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
WHO IS WEALTHIER?
Tom Brady
Peyton Manning
Income - $14,120,000
Income - $19,200,000
Net Worth - $120 Mill
Net Worth - $115 Mill
Let’s learn more to answer this question!
© Take Charge Today –August 2013– Statement of Financial Position – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
Net Worth
Is an objective
measure of financial
wealth
Wealth
Indicates the monetary
value of all possessions
that a person or
household owns, minus
the total amounts owed
to others
© Take Charge Today –August 2013– Statement of Financial Position – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
NET WORTH VS. INCOME
Net Worth
Income
Depends on how a
person manages their
income
Money received such as
wages earned from
working for pay
A person may have high income
and low net worth or vice versa
© Take Charge Today –August 2013– Statement of Financial Position – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
WHO IS WEALTHIER?
© Take Charge Today –August 2013– Statement of Financial Position – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
HOW DO YOU DETERMINE WHAT
YOUR NET WORTH IS?
Statement of Financial Position - A
financial statement that describes an
individual or family’s financial condition
on a specified date by showing assets,
liabilities, and net worth
Shows a person’s net worth
Similar to a net worth statement or
balance sheet
© Take Charge Today –August 2013– Statement of Financial Position – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
THREE COMPONENTS
1. Assets
2. Liabilities
3. Net Worth
© Take Charge Today –August 2013– Statement of Financial Position – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
WHAT IS AN ASSET?
Asset Everything a
person owns
with monetary
value
Cash
Value of
personal
possessions
© Take Charge Today –August 2013– Statement of Financial Position – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
WHAT ARE LIABILITIES?
Loans
(mortgage,
automobile,
student)
Liabilities – A
debt or
obligation
owed to
others
Balance on a
credit card
© Take Charge Today –August 2013– Statement of Financial Position – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
LIABILITIES VS. EXPENSES
Definition
Characteristics
Liabilities
Expenses
Money owed to
others
Money spent
Total amount
owed
Bills paid on a regular basis
Automobile loan $5,490 owed
Monthly payment to repay
that automobile loan $180/month
Example
© Take Charge Today –August 2013– Statement of Financial Position – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
HOW CAN YOU INCREASE
NET WORTH?
How do you increase
assets and/or
decrease liabilities?
Evaluate how you
manage your
money
Assets
Liabilities
© Take Charge Today –August 2013– Statement of Financial Position – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
SUMMARY
Statement of Financial Position is an important money
management tool that shows net worth
Assets – Liabilities = Net Worth
Net worth is an objective measure of wealth
Net worth is your “financial thermometer” to
objectively measure your financial position
To increase net worth you will have to increase assets
or decrease liabilities
© Take Charge Today –August 2013– Statement of Financial Position – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
• https://docs.google.com/spreadsheet/ccc?key=0AgC8bo4HRotdDJYY1JMakpnOWlNNDZ6SDZERkJXRkE&hl=en#gid=0
© Take Charge Today –August 2013– Statement of Financial Position – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
NET WORTH ACTIVITY
• Step 1
• Let’s read the handout together about a recent college graduate
and highlight and underline important financial information
• Step 2
• Go to the PCs and find the Mommy’s Net Worth Calculator on the
Anfindsen Global Drive
• Complete the spreadsheet using the Biography
• When done check your answers
© Take Charge Today –August 2013– Statement of Financial Position – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
START DAY 11
© Take Charge Today –August 2013– Statement of Financial Position – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
THE COSTS ADD UP
How much do you think each item would cost if
purchased every day for one month?
Item
Average Cost
of Item
Approximate
Cost Per Month
if purchased
every day
16 oz. soda
$1.00 - $2.00
$30.00 - $60.00
16 oz. energy or
sports drink
$2.00 - $3.00
$60.00 - $90.00
Candy bar
$0.75 - $1.25
$22.50 – $37.50
16 oz. Latte’ or
flavored coffee
$2.50 -$3.50
$75.00 - $105.00
Approximate
Cost Per Year if
purchased
every day
$365.00 $730.00
$730.00 $1095.00
$273.75 $456.25
$912.50 –
$1277.50
© Take Charge Today –August 2013– Statement of Financial Position – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
THE INCOME AND
EXPENSE STATEMENT
Income and Expense
Statement - lists and
summarizes income and
expense transactions
that have taken place
over a specific period of
time, usually a month or
year
© Take Charge Today –August 2013– Statement of Financial Position – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
THREE COMPONENTS
Income
Expenses
Net gain or
net loss
© Take Charge Today –August 2013– Statement of Financial Position – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
WHAT IS INCOME?
Income –
money
received
© Take Charge Today –August 2013– Statement of Financial Position – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
INCOME CATEGORIES
Earned income – any money
earned from work
Unearned income – income
received from sources other than
employment
Received Income from
Government Programs – offer a
form of income, usually temporary
© Take Charge Today –August 2013– Statement of Financial Position – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
WHAT ARE
EXPENSES?
Expenses –
money spent
© Take Charge Today –August 2013– Statement of Financial Position – Slide 23
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
EXPENSE CATEGORIES
• Taxes
• Saving and Investing
• Insurance
• Housing
• Transportation
• Expenses
Food will vary for every
• Other
person
© Take Charge Today –August 2013– Statement of Financial Position – Slide 24
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
EXPENSE CATEGORIES
• Variable Expenses are those that
change each time period
• Fixed Expenses are expenses that
remain the same each time period
© Take Charge Today –August 2013– Statement of Financial Position – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
NET GAIN OR NET LOSS
Income
Expenses
Net Gain
or Net
Loss
Net
gain
Net
loss
© Take Charge Today –August 2013– Statement of Financial Position – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
FIND A TRACKING METHOD THAT WORKS FOR
YOU
Record in writing
Smartphone
Depository
institution
account
statements
Keep receipts
Money
management
computer software
program
A written system is more effective than a mental
system – like Evan you can trick yourself into
thinking you spend less than you do!
© Take Charge Today –August 2013– Statement of Financial Position – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
Net Gain
Use that money for
savings or other
expenses
Statement of
Financial Position
What is my
financial position
today?
Net Loss
Increase income and/or
decrease expenses
Income & Expense
Statement
Spending Plan
How have I
managed my
money in the past?
What is my future
money
management plan?
A spending plan
will help you plan
your spending
© Take Charge Today –August 2013– Statement of Financial Position – Slide 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.3.G1
SUMMARY
Tells you where your
money is coming from and
where it is going
Three components:
income, expenses, and
net gain/loss
Use a tracking method that
works best for you
Customize income and
expense categories
© Take Charge Today –August 2013– Statement of Financial Position – Slide 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona