What is Budgeting?
Income
Expenses
Savings

What is Income? Where does it come from?

What are some sources of Income?

Things to consider…

Federal and State Income Tax, Social Security, Medicare
Gross Income - Taxes
= Net Income


What are expenses?
What are some examples?
Exercise 2A
Monthly Expenses
Food
$200
Gas
$100
Entertainment
$200
Clothes
$50
Cell Phone
$100
Utility Bills
$150
Auto Insurance
$100
11%
22%
17%
Gas
Entertainment
11%
11%
Clothes
Cell Phone
Utility Bills
22%
6%
Food
Auto Insurance
Fixed
Variable
Periodic



Using the pie chart you just created, decide if
each expense is fixed, variable or periodic
Does the majority of your money go toward
fixed, variable or periodic expenses?
Do you have primarily one type of expense?


Variable expenses fluctuate in amount
For example, you can spend more or less on
groceries depending on what you buy:
VS.

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
The most important expense…SAVINGS
Increases the likelihood of reaching your
SMART goals
Pay Yourself First (P.Y.F.) strategy




Pay Yourself First (P.Y.F.) strategy
Whenever you receive income, immediately set
aside a certain amount
Don’t miss the money, it’s like you never had it
in the first place
Savings becomes an expense to add to your
budget

Is savings a fixed or variable expense?


How might this work as each?
When might you use a fixed approach? A variable
approach?
1.
2.
3.
4.
5.
Set SMART goals
Analyze Information
Create a Plan
Implement the Plan
Monitor and Modify the Plan



A Budget is a plan that outlines an individual's
financial and operational goals
It is a plan that serves to allocate resources, evaluate
performance, and formulate plans
Helps to prioritize spending
$100
$300
$800





Establish a time-frame (weekly, monthly?)
List all money coming in as income
Divide expenses by type and list (Don’t forget
P.Y.F.!)
Subtract your total expenses from your total
income
Analyze your budget…update it regularly
Estimated Income:
Paycheck (after taxes)
Fixed Expenses:
Savings
Rent
Estimated Variable Expenses:
Food
Gas
Periodic Expenses:
Car Insurance ($300/6 months)
Total Expenses:
Total Income-Total Expenses:
$2000
$1400
$300
$200
$50
$50
$2000
$2000-$2000=0



Jessica earns $8/hour working approximately
25 hours a week. About 30% of her pay is
deducted for taxes. She earns about $15 a
month in interest.
Her monthly expenses are $235 for car
payment, $35-45 for cell phone, $40-60 for gas,
and $50 for auto insurance. She also likes to
buy games, music, clothes and electronics.
Her short-term goal costs $1000, but she has
already saved $500. Her long-term goal is to
attend college and she has already saved $7000.

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Checking Account
Statements
Savings and Investment
Statements
Pay Stubs vs. W-2
Tax Documents
Insurance Statements
Loan and Credit Card
Statements
Receipts and Warranties
Envelope
System
Track with
Checking
Account
Tally System
Budget
Spreadsheet
Personal
Finance
Software

Label envelopes with each of your expense
categories. When you receive money,
distribute it among the envelopes based on the
expense amounts from your budget. When the
envelope is empty, you are either done
spending in that category or you must move
money in from another envelope. Note the
date and amount whenever putting money in
and out of an envelope
Rent
Car
Cable




Tally System - Keep a tally of your spending
categories and save your receipts
Checking Account Tracking – Monitor your
deposits and withdrawals. As you spend cash,
note how much spent and what you bought.
Budget Spreadsheet – Create a spreadsheet to
track expenditures and cash inflow
Personal Finance Software



Creating a budget (and sticking to it!) is a
critical part of the Financial Planning Process
Helps achieve SMART goals
Make the most of your
money

Unit Assessment 2-1

Use your spending log from Unit 1 to develop a
budget plan for the next month