Money Management - 101Practical Money Skills for Life

What a Spending Plan will do for YouAllow you to learn how finances work in your lifeEnable you to make good decisions about how you use moneyMake you aware of where your money is goingGive you a way to save for specific itemsHelp you to live within your income- or decide if you need to increase it

A Spending Plan willShow you where to cut spendingProvide methods for keeping good records of spendingAllow you to spend money without feeling guiltyCreate a way to measure your progressImprove communication with other people

Step 1: Assess Needs

Make a realistic list of needs and wantsNeedsWantsFoodLots of MoneyClothingCell PhoneHousingVCR or Big TVTransportationNew CarChild CareDesigner JeansInsuranceVacationsMedicinesBoatTitan Tickets

Step 2: Set GoalsMake sure your goals are SMARTSpecific- Clearly state what you want to doMeasurable- Measure by time and/or money neededAttainable- Make sure your goal is realistic and possibleRelevant- Make sure goals fit your needsTime related- Set a definite target day (day/month/ year)

Step 3: Make a PlanPut things in Priority Order- Imagine the actions you need to take to get from where you are now to where you want to be.

Goals are dreams with deadlines! Post your goals where you will see them frequently. Find a picture to represent your goals. Make them happen.

SMART GOAL

GOAL:Use cash to purchase a refrigerator in 6 months. New refrigerator will cost $600.00.

MUST SAVE FROM EACH PAYCHECK:$100/Paycheck - if paid monthly$50/Paycheck - if paid bi-weekly or semi-monthly$25/Paycheck - if paid weekly

I will save $25.00 from each weekly paycheck for refrigerator. Steps to Get There:Pack lunches.Borrow movies and CDs from the library.Shop with a list for everything.Stay out of Walmart!Your Plan with ActionsTARGET DATE:6 MONTHS

PRIORITIZING GOALSBuild an emergency savings of $_____________.Put $50.00 from each paycheck for 5 months.Use OVERTIME or BONUS $$ to build more quickly.Build a retirement account.Put $50.00 (automatic deduction)401(k)Roth IRA

Two Parts of Money ManagementThe money that comes in - INCOMERegular take home incomeThe money that goes out SPENDINGMust know what you are spending to develop a plan for managing your money. Three type of expenses

Making your MoneyHow much money comes in each month?Income has two parts:Gross income- total you actually earnNet income (take home pay) - what is left over after your employer takes out deductions for taxes, Social Security, Medicare, and other needs.

Three Types of ExpensesFixed expenses

Flexible (variable or controllable) expenses

Periodic or occasional expenses

FIXED / MONTHLY EXPENSESCar PaymentsRent or MortgageChild CareCable TVCar Insurance

FLEXIBLE / VARIABLE EXPENSESClothingFoodat homeaway from homeTelephoneUtilitiesGasoline

FLEXIBLE / VARIABLE EXPENSES (cont)..Public TransportationMedical / DentalRecreationSupplieshouseholdpersonal

OCCASIONAL / SEASONAL EXPENSESCar Maintenance / RepairsLicense TagsInsurance PaymentsGifts / HolidaysSchoolTaxesMagazine SubscriptionsVacations$500$100$600$800$0$200$0$200$2400 / 12 = $200/month

Tracking your moneyKeep and organize the following items to help you keep up with expenses

Check registersCheck stubs and canceled checksReceiptsBills and invoices Credit card statementsCalendars, diaries, pocket notebooks

Trimming ExpensesPack lunch for work or schoolShop for store or generic brands Use the public libraryChoose free recreational activitiesCheck resale shops or garage sales for bargainsEat out less oftenHandle home maintenance and repairs yourselfUse public transportation when possibleTake advantage of free activities

SAVINGSIts never impossible to save money, no matter how small the amount.

Saving Your MoneyTwo types of savings accounts1)Emergency fund provides means for paying for emergencies instead of using credit2) Nest egg account- helps you reach specific goals such as buying a house or taking a vacation

Start the Savings Habit Now!If you save $20 per week, every week for a year, after one year you will have saved $1,040!

Keep this up and after five years you will save $5,200, not to mention the interest you will earn!

WAYS TO SAVEWork average 22 days/monthLunch $8.00/day $176/month Coffee $1.00/day $22/month Soft Drinks $1.00/day $22/month Childs Lunch $2.00/day $44/monthTotal$264/month

Remember these tipsDont shop on paydayDont shop when youre tiredDont shop for food when youre hungryTake your time. Try not to shop when you have to hurryYou dont have to buy it todayRemember, nothing is a bargain unless you need itHave a spending plan and stick to itNo one can make you buy anything

How much debt is too much?Rule of thumb for consumer debtUnder 15%=comfortable15-20%=CautionOver 20%=Danger!!!

To figure your debt-to-income ratio:

Total average monthly debt payments(excluding mortgage/rent and utilities) $400Monthly take-home pay$2,000

$400 $2,000 = .20 = 20%

Managing your MoneyDeveloping a Personal Spending Plan will show youWhat money is coming in How much you spend on the basic needs, fixed and variableHow much you need to set aside for periodic or unexpected expensesHow to plan for savings and investingWhat is left over for your wants

Money Management - 101

Get the most from your MoneySet GoalsDevelop a PlanBalance Spending and Saving

**How much debt is too much? There is a simple formula that you can use to calculate your debt to income ratio. First, all your consumer debt payments, not including your mortgage payment/rent an utilities. These include car payments, installment loans, student loans, credit cards and medical bills. Divide the total of your monthly take-home pay into your total monthly consumer debt payments to determine the percentage of your income committed to debt repayment each month. The Rule of thumb guideline is Percentage of debt under 15% is comfortable level, 15-20% is caution, and over 20% is a dangerous level. You have too much debt. Remember- these percentages may not apply of all people in the same way. If your income is quite low or your family is large, you may need to keep your debt level even lower.