29
Spending plan Essentials The BUDGET
1.15.2.G1
Spending plan
Essentials
The BUDGET
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Having a plan
A spending plan is a paper or electronic
document used to record both planned and actual
income through expenditures over a
period of time
Step 1: Track Current
Income and Expenses
Step 2: Creating Personalized Income and
Expense Categories
Step 3: Allocate
Money to Each
Category
Step 4: Implement and Control
Step 5: Evaluate and
Make Adjustments
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Income
(Money earned)
Wages from a job, allowance, gifts
Expense
(Money Spent)
Fixed Expenses
May have a fixed amount due each
month and are contractual
Flexible Expenses
Vary each month in the amount owed and
are not contractual
Spending Plans
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Decide if each item is income, a fixed expense, or a
flexible expense
Indicate a response by holding up the
corresponding activity card
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Rent
Fixed expense
Wages
Income
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Groceries
Flexible expense
Internet bill
Fixed expense
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Tips
Income
Utilities
Flexible expense
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Gift from family
Income
Savings
Fixed expense
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Automobile registration
Fixed expense
Eating out/Snacks
Flexible expense
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Spending plan activity
Scholarships
Income
Hobbies
Flexible expense
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Step 1:
Track Current Income & Expenses
Estimate how much money is earned and the amount of
expenses incurred during a specific period of time
Usually concurrent with an individual’s pay day
May require tracking daily expenses for a few weeks
What have you spent money on in the past 48 hours?
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Tracking Methods
Must work for the individual! There is not one right method!
Carrying a small
notebook and writing
down all expenses
Keep all receipts
Use a debit card if your
financial institution
creates spending
reports for your account
Use a checkbook
or debit card register
Input information into a cell phone or computer
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
The Costs Add up You may Not realize how much Until you Track!
Eating lunch out 5 days
per week
$5-$10 each time
$1,300-$2,600 per year
Daily sport drink
$2.00 each daily
$728 per year
Monthly haircut
$35.00 per month
$420 per year
Weekly date night at the
movies with popcorn
$30 per week
$1,560
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Step 2:
Create Personalized Income & Expense
Categories
Each spending plan is unique because of individual & family values
Spending plan categories are based
upon the individuals/families
income and expenses
Income categories: salary, interest, loans, savings withdrawals
Major expense categories: housing, transportation, food, savings and investing
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Housing
Housing is the largest
of the four major
expenditures
Recommended to be
30% of an individual’s
net income
What expenses are associated
with housing.
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Cost Associated with Housing:
Monthly payment
• A fee charged each month to live in a home
Utilities
• Include electricity, water, and garbage fees
Home or renters Insurance
• Purchased to protect the home and possessions inside from loss
Taxes
• Paid by the owner of the home
Maintenance
• Includes paying for the upkeep of a home
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Transportation
The second largest
major expenditures
Recommended 20% of
an individual’s net
income
What expenses are associated
with transportation?
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1 Costs associated with
Transportation:
Monthly payment
• Is made if a loan is taken out to purchase a vehicle
License and Registration
• Required by law to own a vehicle
Insurance
• Protects the vehicle & individuals if involved in an accident
Maintenance
• Oil, Tires, Brakes
Fuel
• To operate the vehicle
Public Transportation
• Bus, metro pass, taxis or parking fees
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Food
The third most
expensive category
within an individual’s
spending plan
Recommended 15% of
an individual’s net
income
What expenses are associated
with food?
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Insurance
Recommended 7% of an individual’s income
Includes: Health Insurance
Disability Insurance
Life Insurance
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Additional expenses
Savings and investing
10-20 % of net income
Save at least 6 months
worth of expenses for
emergencies
Continue to invest
Other Expenses
Fulfills additional needs and
accounts for 18% of an
individual’s net income What expenses would be in
the Other category?
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Step 3: Allocate money to
each category
Reference tracking from Step One To have realistic amounts of income and expenses in the spending plan
Use categories created in Step Two
Refer to goals and determine if any changes in spending need to be made
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 23
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Creating a Spending Plan
Each individual/family uses a different program to
create a spending plan
Paper and pencil
Electronic programs such as Quicken, Quick Books,
Microsoft Excel/Word
Cell Phone or Tablet Computer Apps
Must be something that an individual can manage
effectively
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 24
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Net gain
There is remaining money to either save, spend or invest
Net loss An individual is spending more money that he/she is
earning and has to use credit (borrowed money) to meet
their financial obligations
A spending plan should have income and
expenses matching one another (reach zero)
Income Expenses Net gain or loss
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Step 4: Implement and Control
Implement
Put plan into action!
Control
Continued monitoring of
spending allows an individual to know if they are
spending too much in a category
Helps avoid using credit or withdrawing
money from a savings account
Utilize a control system that fits your personality
and life situation
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Control: Check Register
System
Helps consumers to track all expenditures in a checkbook register which has been divided into spending plan categories http://www.budgetmap.com/step1.htm
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Electronic Spending Plan
Multiple types of software are available for consumer to use to help keep track
of their financial records
The Mint
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Electronic Spending Plan
Multiple types of software are available for consumer to use to help keep track
of their financial records
https://www.youtube.co
m/watch?v=BAhXK-
ATKWw
Google Wallet
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Spending Plans Essentials – Slide # 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.15.2.G1
7.15.2.G1
Step 5: Evaluate and make
adjustments
Assess if spending plan
is working
Are goals being met?
Are the dollar amount allocations in each category accurate?
Is credit being used?
If so, then the spending plan
needs to be adjusted (by increasing income or decreasing expenses)
Make changes to spending
plan if necessary
Begin the process again!
Why is evaluating and adjusting a
spending plan important?
