Budgeting:
How Will You Use Your Money?

Section 6.1
Choose Financial Goals
 Budget – A plan for dividing up your income among spending and saving.
 Based on short-term goals and longterm goals
 First Step:

Section 6.1
Choose Financial Goals
 Short-term Goals – things you hope to achieve within the next year or two.
 Do not have much overall impact on your life
 Usually limited planning
 Don’t involve a large amount of money

Section 6.1
Choose Financial Goals
 Long-term Goals – Things you hope to achieve in more than a year or two.
 Most have a major impact on your life.
 Requires managing your money NOW to achieve future goal
Examples: College, Buy a Home, Start a
Business, Secure Your Retirement

Section 6.1
Choose Financial Goals
 Short-term Goals = Long-term Success!
 When you consider satisfying your short-term goal, think about how your choice may affect your future
 Prioritize your goals to focus on those most important to you

Section 6.1
Choose Financial Goals
 Your Goals Affect Others
 Your Current Family – borrowing / using money from parents
 Your Future Family – loans / borrowing, you give up future spending for current spending
 Your Community – Some of your long-terms goals (ie: career goals) will help others along the way

Section 6.2
Track Income and Expenses
 Track Your Income – Keep track of your income
 Paycheck stub is the most accurate record of income.
 Keep your own written record of income that does not have documentation.

Section 6.2
Track Income and Expenses
 Track Your Spending – Keep track of your spending
 Sales receipts
 Credit card statements
 Checkbook register
 Keep a written record of spending that does not have documentation.

Section 6.2
Track Income and Expenses
 Filing System – establish a filing system to keep records straight
 Make files for EXPENSES and INCOME
 As you receive income or buy something, file your receipts, paycheck stubs or notes about the transaction in the appropriate folders
Make record keeping a life-long habit to take control of your financial life!

Section 6.2
Track Income and Expenses
 Purpose for Keeping Records
 Help you plan
 Learn your spending habits
 Keep track of your progress towards your goals
 Can control your spending

Section 6.2
Track Income and Expenses
 Fixed Expenses – amounts you have already committed to spend
 Usually give you the exact amount
 You know when they are due
 You can plan for these expenses
Examples: House Payment/ Rent
Expense, Property Taxes, Car insurance

Section 6.2
Track Income and Expenses
 Flexible Expenses – amounts that you can choose to spend or not to spend
 Most things you want are flexible expenses!
 Luxury goods – goods that have special qualities that make them more expensive than alternative goods
Example: Sports car is more expensive than a compact car

Section 6.3
Your Budget Worksheet
 Budget Worksheet – A planning document to record your expected and actual income and spending over a short time
 Usually made for one month at a time
 A way to compare how you think you spend your income with how you actually spend it.

Section 6.3
Your Budget Worksheet
Steps to Preparing the Budget Worksheet
1) Create a Worksheet
4 columns should include:
 Categories of income and spending
 Expected amounts you receive, spend, or save
 Actual amounts you receive, spend or save
 Difference between expected and actual

Section 6.3
Your Budget Worksheet
2) Estimate your Income
 Only amounts you can be sure of
 Don’t write money that isn’t sure income
 UNDER-estimate income!
3) Estimate your Expenses and Savings
 Include fixed and flexible expenses
 PLAN for savings!
 OVER-estimate expenses!

Section 6.3
Your Budget Worksheet
4) Record Your Actual Income and Expenses
 Keep all of your receipts
 At the end of the month record them on the worksheet
5) Calculate the Differences
 Compare your actual amounts with your estimated amounts
 Analyze your spending for the month

Section 6.3
Your Budget Worksheet
Budget Pitfalls
 Some people get too specific
 Keep categories and estimates simple
 Keep good records to help predict spending
 Don’t lump too many expenses under miscellaneous
 Try to categorize frequent expenses
 People give up on budgets because they take up too much time. Should only take an hour a week. It will help you achieve your long-term goals.

Section 6.4
Create Your Budget for the Year
 Purpose of a Budget Worksheet – to divide your income between the spending and savings options that will help you meet your goals.

Section 6.4
Create Your Budget for the Year
A Balanced Budget
Total Income = Expenses + Savings
Ways to Balance Your Budget
1) Borrow money (loans)
2) Reduce Expenses - when you reduce spending, you must cut back only on flexible expenses
3) Reduce Savings

Section 6.4
Create Your Budget for the Year
Changing Your Budget
1) When your goals change
2) When your income changes
3) When your expenses change
Family Budget
- Plan together as a family
- Everyone has different needs and wants
- If everyone understands the family budget, everyone can have realistic goals