Personal Finance Chapter 4 Name: Grace Davis Topic/Objective: Date: 9/25/18 Class: P.1. Essential Question: How does budgeting help you achieve your financial goals? Questions/Main Ideas Notes (2 per section) 4.1: Budgeting and Planning ● Financial Planning Planning, budgeting, and good records lead to great financial security. o Get Started Always consider your income and your expenses. Gross income is important but does not matter as much as your disposable income. V. Disposable Income: The money you have left to spend/save after all taxes and other deductions are taken. Understand your financial resources. V. Financial Plan: A set of goals for spending, saving, and investing the money you recieve. o Visualize Your Future What are the steps start and finish a financial plan? Keeping track of what comes in and what goes out is a good way to help you realize the changes that can be made. Prepare your budget. o Prepare a Budget The budget must balance money out=money in This helps to prevent borrowing money or taking loans. V. Budget: A spending and saving plan based on your expected income and expenses. ▪ Steps in Preparing a Budget 1. Estimate expected total income for a certain week. 2. . Estimate your expenses, or money you’ll need day to day. 3. Decide how much of your income you would like to save for future needs. 4. Balance your budget. ▪ Budget Line Items monthly budget=annual/12 V. Fixed Expenses: Are the costs that do not change from month to month. You have to pay them. Like rent on a house. V. Variable Expenses: Are costs that vary in amount and type, depending on the choices you make. V. Cash Surplus: When your income exceeds your expenses. V. Cash Deficit: When estimated expenses are greater than estimated income. ▪ Balancing Your Budget when your budget is not balanced, you can cut your expenses, borrow money or dip into savings, or you can increase your income. Fixed cost are difficult to change. Variable cost are easy to change. ● Tracking Your Progress when you achieve goals, you can track what you’ve accomplished and what remains to be done. This makes long range planning easier. o Income and Expense Records W-2 forms show the money earned and deductions from your paycheck. They also reveal taxes withheld. o Net Worth Statement A person’s net worth based on his or hers assets and liabilities. V. Assets: Items of value that a person owns. V. Wealth: The accumulation of assets. V. Liabilities: Money or debts owed to others. V. Net Worth: Asset-Liabilities= net worth o Personal Property Inventory Anything of value that you own, except real estate. cars and clothing are just to examples. o Tax Records Always keep copies of tax records, A copy of the signed form, W-2 forms, and other receipts verifying income and expenses listed on each return. o Other Records Some keep lists of credit card numbers and phone numbers to call if cards are lost/stolen. Summary(2-3 complete sentences): It helps by managing what you spend, only buy what you need vs. what you want. If you can save money and put it towards something else like a vacation, and you still pay all of your needed expenses with no problem then you have achieved a level of financial success.