1.15.2.G1
Spending Plans
“Take Charge of Your Finances”
Advanced Level
1.15.2.G1
Typical Spending Plan Pie Chart
Housing
10%
Transportation
30%
Food
18%
Insurance
7%
Provides guidance
when creating a
spending plan
Other
15%
20%
Saving and
Investing
What variables may cause these
percentages to be different?
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Having a plan


Financial planning - a tool
used to achieve financial
success based upon the
development and
implementation of
financial goals
Spending plan - paper or
electronic document used
to record both planned
and actual income through
expenditures over a period
of time
Step 5– Evaluate
and Make
Adjustments
Step 1- Track
Current Income
and Expenses
Spending Plan
Development
Process Step 2– Creating
Step 4–
Implement and
Control
Step 3– Allocate
Money to Each
Category
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Personalized
Income and
Expense
Categories
1.15.2.G1
Everyone has a unique
spending plan

Based upon
the following
elements:
Something
unnecessary,
but desired
Need
An essential
item
required for
life
What does the
Brown Family value?
How will these values affect
their spending?
Want
Value
A fundamental
belief about what
is desirable,
worthwhile, and
important to an
individual
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
SMART Financial Goals
SMART
Goals
Specific
Measurable
Exactly what
is to be done
with the
money
involved
Write the
exact dollar
amount
Attainable
Determine
how it can be
reached
Realistic
Time Bound
Do not set the
goal for
something
unattainable
or unrealistic
Why is goal setting important?
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Specifically
state when
the goal
needs to be
reached
1.15.2.G1
Example of SMART goals

I plan to save $15.00 from my monthly
paycheck for ten months to purchase a new
MP3 player for $150.00
Write one SMART financial
goal for yourself.
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
SMART goals



Evaluate your goal and identify if each
component of a SMART goal was included
Re-write your goals to be SMART goals
Share your goals with your group
Complete questions one and two by writing
SMART goals for the Brown family.
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Components of a Spending Plan


Gumball machine
represents components of
the financial planning
process
Income - money earned


Gumballs going into the
machine
Wages from a job,
allowance, gifts
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Components of a Spending Plan


Expense - money spent
Money going out of the gumball
machine


Fixed expenses -may have a fixed
amount due each month and are
contractual
Flexible expenses -can vary each
month in the amount owed and
are not contractual
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity


Decide if each item would be income, a fixed
expense, or a flexible expense
Indicate a response by holding up the
corresponding activity card
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity
Paying Rent
Fixed expense
Wages
Income
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity
Groceries
Flexible expense
Internet bill
Fixed expense
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity
Tips
Income or Flexible Expense
Utilities
Fixed expense
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity
Gift from family
Income
Savings
Fixed expense or Income
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity
Automobile registration
Fixed expense
Eating out/Snacks
Flexible expense
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Activity
Scholarships
Income
Hobbies
Flexible expense
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
How to Develop and Maintain a
Spending Plan


Steps 1-3 help develop
a spending plan
Steps 4-5 help
maintain a spending
plan

Evaluate and adjust to
meet personal needs
and adapt to life
changes
Step 5– Evaluate
and Make
Adjustments
Step 1- Track
Current Income
and Expenses
Spending Plan
Development
Process Step 2– Creating
Step 4–
Implement and
Control
Step 3– Allocate
Money to Each
Category
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Personalized
Income and
Expense
Categories
1.15.2.G1
Step 1: Track Current
Income and Expenses
Step 5– Evaluate
and Make
Adjustments
What period of time will
your spending plan include?
Step 4– Implement
and Control
Step 3– Allocate
Money to Each
Category
Usually concurrent
with payday
How much money
am I earning?
Income
Step 1- Track
Current Income
and Expenses
How much money
am I spending?
Expenses
Necessary to creating a realistic spending plan
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Step 2– Creating
Personalized
Income and
Expense Categories
1.15.2.G1
Tracking Methods





Carrying a small notebook and writing down all
expenses
Keep all receipts
Use a debit card if your depository institution
creates spending reports for your account
Input information into a cell phone
Cell phone applications
Must work for the individual!
There is not one right method!
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
The Costs Add Up

Weekly date night at
the movies with
popcorn



$30 per week
$1,560 per year
Daily Latte


$3.75 every day
$1,369 per year

Eating lunch out 5 days
per week



$5-$10 daily
$1,300-$2,600 per year
Daily sport drink


$2.00 daily
$730 per year
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Gross vs. Net Income
• Total amount of
money earned during
a pay period
(salary or hourly wage
x hours worked)
Gross Income
Payroll
Deductions
• Taxes
• Retirement
• Health Benefits
• Take home pay
(the amount of the
paycheck)
Net Income
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Payroll Deductions

Taxes




Required by local, state, and federal governments
Provide public goods and services
Account for approximately 30% of an individual’s gross
income
Payroll deductions:





What are two items or services you use
that are paid for by taxes?
Federal Taxes (mandatory)
State Taxes (If applicable)
Federal Insurance Contribution Act (FICA tax) (mandatory)
Retirement (depends upon the employer)
Health care benefits (depends upon the employer)
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Saving and Investing


Savings- Current income not spent on
consumption
Pay Yourself First!




Save then spend
Recommend saving 10-20 % of net income
Save at least 6 months worth of expenses for
emergencies
Continue to invest
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 23
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Housing Typically 30% of net income

Possible expenses associated with housing:






Monthly payment – a fee charged each month to
live in a home
Utilities – includes electricity, water, and garbage
fees
Home or renters insurance – purchased to protect
the home and possessions inside from loss
Property taxes – paid by the owner of the home
Maintenance – Repairs, cleaning, and care
Household furnishings - furniture, decorations, etc.
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 24
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
TransportationTypically 20% of net income

Possible expenses associated with transportation:






Monthly payment – if a loan is taken out to purchase an
automobile
License and registration – required by law to own an
automobile
Insurance – required by law to protect the vehicle and
individuals if involved in an accident
Repairs and maintenance
Fuel
Public transportation fees – including bus, metro pass,
taxis, or parking fees
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
FoodTypically 15% of net income

Possible expenses associated with food:





Food at the grocery store
Meals at restaurants
Snacks eaten out (coffees, treats)
Party and entertainment foods
Non-food kitchen supplies (plastic wrap, dish
soap)
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
InsuranceTypically 7% of net income

Arrangement between an individual and an
insurance company to protect the individual
against risk
Home/renters
Automobile
Life – provides
financial support to an
individual’s
beneficiaries upon
death
Health – pays a
portion of health care
expenses if one is sick
or injured
Disability – provides
financial support if an
individual is injured
and cannot work
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Other ExpensesTypically 18% of net income
Family member
care (childcare)
Personal care
Communication and
computers (Internet,
cell phone, cable
television)
Medical costs
not covered by
insurance
Clothing
Educational
expenses
Pet care
Entertainment
Gifts and
charitable
contributions
Credit costs
(loan payments)
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Step 2: Create Personalized Income and
Expenses Categories


Categories are based
upon the
individuals/families
income and expenses
Reference tracking
from Step One
Step 5– Evaluate
and Make
Adjustments
Step 1- Track
Current Income
and Expenses
Step 2– Creating
Step 4–
Personalized
Implement and
Income and
Control
Expense
Categories
Step 3– Allocate
Money to Each
Category
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Step 3: Allocate Money to Each
Category
Step 5– Evaluate
and Make
Adjustments
Step 1- Track
Current Income and
Expenses
Use categories created in Step Two
Step 4– Implement
and Control
Reference tracking from Step One
Step 3– Allocate
Money to Each
Category
Refer to goals and determine if any changes
in spending needs to be made
A spending plan is now developed!
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 30
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Step 2– Creating
Personalized
Income and
Expense Categories
1.15.2.G1
Spending Plan Template

Everyone uses a different program to create a
spending plan




Paper and pencil
Online software
Electronic programs such as Microsoft Excel and
Word
Must be something that an individual can
manage effectively
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 31
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Spending Plan Template
Income
Amount
Wages
$
Total Income
$
Expenses
Amount
Housing
Rent or mortgage
Utilities
Maintenance
Insurance
$
Food
Eating out
Groceries
$
Total Expenses
$
Total Income – Total Expenses
$
Percentage of income used for
each expenditure
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 32
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Net Gain or Net Loss?
Income



Expenses
Net gain
or loss
Net gain - there is remaining money to either save, spend or
invest
Net loss - an individual is spending more money that he/she
is earning and has to use credit (borrowed money) to meet
their financial obligations
A spending plan should have income and expense matching
one another (reach zero)
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 33
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
The Brown Family
Complete Step 2
• Review spending plan categories
• Answer taxes question
Complete Step 3
• Complete the spending plan with the Brown families income
and expenses
• Analyze the pie chart
- Similarities
- Differences
- Adjustments
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 34
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Step 4: Implement and
Control

Step 1- Track
Current Income and
Expenses
Implement:


Step 5– Evaluate
and Make
Adjustments
Put plan into action!
Control:




Step 4– Implement
and Control
Step 2– Creating
Personalized
Income and
Expense Categories
Step 3– Allocate
Money to Each
Category
Determine what was actually spent
Continued monitoring of spending allows an
individual to know if they are spending too much
in a category
Helps avoid credit and savings use
Utilize control systems
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 35
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Control Systems



Envelope systems – place the actual budget amount
of cash from a paycheck into a specific envelope
system for the expense
Check register system –track all expenditures in a
checkbook register which has been divided into
spending plan categories
Electronic spending plan systems – Multiple types
of software are available

Cell Phone Applications
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 36
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Step 5: Evaluate and Make
Adjustments





Step 1- Track
Current Income and
Expenses
Assess if spending plan is working


Step 5– Evaluate
and Make
Adjustments
Are goals being met?
Are the dollar amount allocations in each
category accurate?
Is money being saved or invested?
Is credit being used? If so, then the spending
plan needs to be adjusted (by increasing
income or decreasing expenses)
Step 4– Implement
and Control
Step 3– Allocate
Money to Each
Category
Make changes to spending plan if necessary
Begin the process again!
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 37
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Step 2– Creating
Personalized
Income and
Expense Categories
1.15.2.G1
The Brown Family
Complete Step 4
• Identify control systems for the Brown family
• Analyze the purpose of a control system
• Brainstorm advice for a family who does not have a control
system in place
Complete Step 5
• Identify expenses encountered, but not included
• Identify ways to adjust their spending plan
• Create a new spending plan
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 38
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
WHAT IS THE LONG-TERM POSITIVE
IMPACT OF A SPENDING PLAN?
To know where your money is going!
To build long-term wealth!
To create long-term financial security!
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 39
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Net Worth Statement
Assets


Liabilities
Net
Worth
Net worth statement - describes an individual or family’s
overall financial condition on a specified date
The components include:



Assets – Everything a person owns with monetary value
Liabilities – Debts or what is owed to others
Net Worth – the amount of money left when liabilities are
subtracted from assets (indicates wealth)
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 40
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Who is Wealthier?
Juanita – earns $35,000 per year Alexis – earns $100,000 per year
Assets
Assets
Home
$60,000
Retirement
$24,000
Automobile
$8,000
Total Assets $92,000
Liabilities
Home
$75,000
Retirement
$35,000
Automobile
$8,000
Total Assets $118,000
Liabilities
College loan
$10,000
College loan
$6,000
Automobile loan
$4,000
Mortgage
$35,000
Credit card debt
$20,000
Mortgage
$65,000
Total Liabilities $41,000
Net Worth $51,000
Total Liabilities $99,000
Net Worth $19,000
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 41
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
Gumball Analogy
Always have more money coming in than out!
Work towards building wealth!




Income (money in)
Net Worth (wealth)
Flexible Expenses
(money out)
Fixed Expenses
(money out)
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 42
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
ANY QUESTIONS
© Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 43
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona