Download Budgeting basics

Budgeting basics
Gross income
The amount of money
BEFORE TAXES!!!!
NET INCOME
The amount of money AFTER taxes.
What you “Take home”
Calculate the taxes to be taken
out……based on your gross
salary
• 10% on taxable income from $0 to $8,925,
plus
15% on taxable income over $8,925 to
$36,250, plus
25% on taxable income over $36,250 to
$87,850, plus
28% on taxable income over $87,850 to
$183,250, plus
What is a budget?
• It is a way to help you live as well as you
can with the money you have.
A plan for how you will spend your
money
An expense is money you spend
2 types of expenses:
Fixed expenses
Flexible expenses
Fixed expenses
• Remain the same each month
Example:
Rent/mortgage
Car payment
Student loans
Flexible expenses
Can change monthly
Example:
Utilities
Food
Clothing
Components of a Spending
Plan
• Expense is money spent
• Money going out of the
gumball machine
– Fixed expenses may have a
fixed amount due each
month and are contractual
– Flexible expenses can vary
each month in the amount
owed and are not contractual
What are two fixed
expenses and two
flexible expenses you
currently have?
Typical Spending Plan Expenses
10%
30%
18%
7%
16%
18%
Housing
Transportation
Food
Insurance
Other
Saving
•
•
•
A reference
Provides
guidance
Based upon net
income
What variables may cause these
percentages to be different?
Unbalanced budget?
• Not enough money to pay to bills
• Not able to save money
• Possible debt
How can a budget help you?
Lets you know where you’ve spent your
money
Allows you to set aside money for bills and
expenses
Can help prepare you for unforeseen events
Makes it easier to save money
How to create a budget?
• Set goals (ex. I want to save $1,000 in
the next year for a car)
• Figure out your income
• Calculate your expenses (food, rent,
cell phone bill, etc)
• Subtract income minus your expenses
Having a plan
Step 5:
Evaluate and
Make
Adjustments
• Financial planning is a
process individuals
engage in to achieve
long-term financial
success while having a
quality standard of daily Step 4:
Implement
living
and Control
• 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
Spending Plan
Development
Process
Step 3:
Allocate
Money to
Each
Category
Step 2:
Creating
Personalized
Income and
Expense
Categories
Sarah’s budget for May
• Sarah’s income is $1200/month NET income
Her monthly expenses include:
$350 for rent
$200 for car payment/insurance
$30 for cable
$100 student loans
$80 utilities
$50 gas for car
$100 for food
$40 savings
$50 for entertainment
How her month actually
went..end of May
$350 for rent
$200 for car payment
$30 for cable
$100 for student loans
$100 utilities
$150 for food (she had friends over for dinner)
$70 on a new outfit
$100 for entertainment
$50 on mom’s birthday
$80 gas for car
How did she do?
• Did she have enough money?
• What could she have done differently?