Budgeting
“Pay Yourself First”
Personal Budget

Working Tool

Take Control

Directs flow of cash received
towards financial goals

Must be Flexible!

Takes discipline
Creating a Budget
?

Reasons for a Spending
…Helps you determine where you are spendingPlan
your
money currently.

…Helps you decide where to spend your money in the
future.

…You have an organized way to save for things that cost
more.

…Puts you in control of your financial future, beginning
NOW.
People Without a Budget…

…Are less likely to know what they have.

…Have no plan, often coming up short
before their next paycheck or allowance.

…Are almost certain to have no plan to
save for more expensive spending goals.
PAY YOUR$ELF FIRST!
S etting aside money for “big ticket items”
A voids borrowing, which costs you a lot! It’s a
V ery wise thing to do, because
Every time you pay yourself first, you are
developing a saving habit that leaves you with
more money to spend later on for things that are
really important to you!
2 Parts of Budgeting

1. Income: Money Received from any source
(limited source)

2. Expenses: Money spent to satisfy
needs/wants
GROSS VS NET

Gross pay is the total amount you earn before any
deductions are subtracted.

$6.50 X40=$260.00

Net pay is the amount you “take home” after
deductions.

Overtime is time worked beyond the regular hours

A standard workday is 8 continuous hours with
scheduled breaks plus an unpaid lunch period.

A standard work week is 40 hours in a 5 day period of
time.
OVERTIME

Fair Labor Standards Act states that:


“employers must pay hourly workers for overtime at the rate of 1 1/2
times the regular rate of pay.”
So… if regular pay is $6.50, then overtime would be $9.75.



40 hours X $6.50 = $260.00
5 hours X $9.75 = $48.75
Gross pay = $308.75
Paycheck Stub

Salaried employees do not receive additional
pay for overtime work.

Their gross pay is the same month after
month.

The employer divides the salary into equal
amounts for each pay period.

Under the “YTD” heading, your gross pay is
added up throughout the year.
Income- Payroll
Deductions

Money subtracted from
Gross Income:




Union Dues
Health Insurance
Savings plans
Taxes
Taxes are the
largest
deductionsrequired by law
4 Payroll Taxes

1. Federal Income Tax

2. State Income Tax

3. Social Security Tax (FICA)


4. Medicare Tax (FICA)


May be able to collect at age 62, average payout $1,230 per
month
Can collect at age 65
FICA- Federal Insurance Contribution Act
Employees match contributions of employers to SS
Progressive Income tax

Your tax bracket is the rate you pay on the taxable
income that you earn

The U.S. uses a progressive tax rate. As a result, as the
amount of money you earn increases so does the rate at
which you are taxed Tax Brackets

For example, if you earned $10,000 during the year,, then
$8,700 would be taxed at 10% and the remaining $1,300
would be taxed at 15%. This works out to be a total of
$1,065, which is less than it would be if the $10,000 was
taxed at a flat rate of 15%, which would yield a total of
$1,500 in income taxes.

http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs
-announces-2014-tax-brackets-standard-deductionamounts-and-more/
W-4 Form
Withholding
Allowance
Certificate

Purpose:

So your employer can
withhold the correct
federal income tax
from your pay
NET PAY

When all deductions are taken out of your gross pay, the
amount left is your net pay.

Net pay is the amount of money you can actually spend.

Net pay is often called “take-home pay” because it is the
amount you can actually use as you wish

Regular wages or salary + Overtime= Gross Pay

Gross Pay - Deductions = Net Pay
Example:
Federal W-2 Wage & Tax
Statement

Employees receive at
beginning of year (JanuaryFebruary)

Itemizes money earned &
withheld by IRS

Based on previous year income

Employee can determine if paid
too much/ too little to IRS


Tax refund- too much
Taxes owed- too little
IRS

Internal Revenue
Service

Responsible for
collecting taxes
When & how to file your tax
return
Single tax payers who earn less

than $8,500 do not have to file a
tax return

Gather your W-2 and any other
documents you need

Complete a 1040EZ if you are
single or married with no
dependents and have income less
than $50,00

Go to irs.gov for more info & forms

April 15 is the deadline to file!
nd
2
part of Budgeting:
Expenses!

Money spent to satisfy
needs/wants

Working Budget: Expenses &
income balance

Expenses should not exceed
income

Limited resources- choices on how
to spend money

Opportunity costs vs. delayed
gratification
Expenses included in
Budget
VARIABLE
EXPENSES
FIXED EXPENSES




Savings- PYF
(Leftover approach
never works)
Example: Car
payment
Insurance
Same amount of
payment each time

Examples: Gas,
Food, Entertainment
costs, clothing
 Can change month to
month
How to Build a Budget
l
Decide on a time frame for tracking
expenses (week, two weeks, month).
l
List all money you have coming in
(income).
l
Make categories for all expenses.
l
Subtract total expenses from income.
l
Study your budget and your financial
plan to make sure it fits with your plans
and goals.