Establishing Healthy
Financial Habits
Personal Finance
The Share, Save, and Spend
System
● Share, Spend and Save- Involves dividing
your funds into three categories.
○
It is a balanced approach that helps you look at
money in terms of your own personal values
systems.
Sharing and Saving
● Sharing can mean buying Christmas
presents, donating to a charity, etc.
● Saving involves putting away for short-term,
medium-term, and long-term goals
Short-term: buying an ipod
○ Medium-term: going to college
○ Long-term: starting a family or buying a house
○
● Buying everyday items such as food, gas,
clothing, etc.
Sharing, Saving and
Spending
● When you put spend last in the Share, Save,
Spend System you are putting less emphasis
on your everyday wants.
○
You will soon staying learning to use phrases such
as. “I cannot afford that right now” or “No I do not
need that”
Values
● Before you can begin setting up your
financial planning system you need to think
about your own values
○
What parts of your life deserve the most attention?
Cause and Effect
● What happens if you blow your whole
paycheck?
● What happens if you pick up an extra shift?
● What happens if you get a speeding ticket?
Your Financial Plan
● Step 1- Determine your current situation
○
○
Analyze how you use money now.
Coming to terms with how you have spent (or
overspend) money in the past can be a powerful
lesson.
● Step 2- Set and prioritize your goals
Decide what goals you have for the short, medium,
and long term
○ Your goals should be specific, measurable, and
realistic.
○ Determine which goals are most important to you
○
Your Financial Plan
● Step 3- Develop a long-term plan
○
○
Think about how you can work towards your goals.
Make sure your plan is something you can do
without a lot of trouble.
● Step 4- Organize your records
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○
Come up with a way to organize your bills, bank
records, and other paperwork.
Use Excel, a notebook, and make sure you keep
important documents
Your Financial Plan
● Step 5- Set up a budget
○
○
Your budget should reflect the three R’s
■ Reality
■ Responsibility
■ Restraint
It should be doable and should reflect your values
● Step 6- Keep it simple
○
○
People who achieve their financial goals keep their
plan simple
Make sure your plan is easily trackable
Income vs. Expenses
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•
Money coming in is income
Money going out represents your expenses
•
Determine your income
o
o
o
Jobs
Allowance
Gifts
When projecting your budget, be realistic about your
income.
Income vs. Expense
A good way to evaluate your spending is to
keep track of your expenses for a month
Date
Item or Service
Purchased at
Cost
Category
May 11
Latte
Mug Shots
$4.42
Food
May 12
Haircut
Barber Shop
$20.00
Grooming
May 12
Movie
Cinema 16
$9.00
Entertainment
May 15
Bus Pass
City Bus
$35.00
Transportation
Income vs. Expense
After you had made a detailed list or log of
your spending for a month, you can put each
item into a category
Category
Week 1
Week 2
Week 3
Week 4
Total
Sports
$24.00
$32.00
$21.00
$27.00
$104.00
Food
$13.00
$20.45
$16.10
$18.00
$67.55
Clothing
$0
$0
$40.00
$8.00
$48.00
Grooming
$0
$20.00
$0
$0
$20.00
Entertainment
$9.00
$21.75
$9.00
$18.00
$57.75
Transportation
$0
$35.00
$0
$0
$35.00
Grand
Total
$332.30
Income vs. Expenses
•
After creating this detailed list or log, you
will have a much better picture of how and
where you spend your money.
o
Ask yourself
 Did my spending reflect what is important to me?
 Two years from now, which of these purchases
will still mean something to me?
 What percentage of my spending is for
necessities?
Keeping Records and Paying
Taxes
• Financial Records include a variety of
documents such as bank statements,
receipts, vehicle ownership papers,
contracts, insurance papers, employment
records, tax records, and bills.
o
These should be kept on file for 7 years.
Filing Systems
•
Paper documents are best kept in file folders
and can be organized a few different ways
Alphabetical
o Numberical
o Chronological
o
•
Computer Based
o
Many banks and other financial institutions provide
online access to your accounts
Online Safety
•
Most online financial service providers are
safe to use. However you should always be
safe and follow the basic rules
Keep a hard copy of your records
o Do not give out personal information
o Never click on links sent in an email
o Regularly update your operating system, firewalls
and antivirus software
o Read the privacy policies of companies before you
click accept.
o
Taxes
•
Taxes- represents all the money that people
pay to their local, state, and federal
government to fund government programs
o
o
o
Federal Taxes- Medicare, Medicade, Education,
the Military, roads and other public projects.
State Taxes- Fund the same sorts of programs and
projects as the federal government
Local Taxes- Go towards Fire and Police departs,
schools, parks, and community services
Types of Taxes
•
•
Sales Tax- You pay when you make a
purchase
Property Tax (real estate tax)- You pay on
the land and homes that you own.
o
Personal Property Tax- You pay on items such as
cars, boats, certain services like hotel rooms and car
rentals.
Types of Taxes
•
•
Estate Tax- You pay when you for
inheritance money
Income Tax- You pay out of your paycheck,
this is figured as a percentage of a person’s
earnings.
o
o
Everyone pays income tax on the money they earn
Gift Tax- Tax paid on gifted money,
o
More than $14,000. You will pay taxes.
Income Tax
•
When you start any job you will have filled
out a form which is called a W4 form.
o
•
This form helps you and your employer figure out
how much money to withhold from each paycheck
Withholding- the money that is taken out of
your paycheck to pay taxes, Social Security,
and any additional fees.
Forms
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•
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W4
1040
1040EZ
Social Security Tax
•
Social Security Tax- Covers the federal
program that people pay into while they are
working
o
o
This money pays for disability, retirement, and life
insurance benefits
New law affect the amount of money you end up
paying into the system and the amount you will
collect when you retire decades from now.