Download Personal Financial Literacy: Managing Financial Well

Personal Financial Literacy:
Managing Financial Well-Being
Essential Question: How do fiscally responsible individuals
create and manage a personal budget?
Education = $$$
Managing a Personal Budget
 Budgets have two sides
 Revenue – Money earned
each pay period
 Expenditures – Money
spent each pay period
 Balanced Budget –
Revenue is equal to
expenditures
 Budget Surplus – Revenue
> expenditures = Savings
 Budget Deficit –
Expenditures > revenue =
Debt
Revenue
 Depending on the career
field, revenue each pay
period can be the same or
it can change.
 Salary
 $47,830 Median salary in
NC
 $3,985.83 a month
 Wages
 Minimum Wage $7.25
 $15,080 per year if you
work 40 hours a week
Revenue
 Sample Pay Stub from May (year to date = Jan – May)
 Gross pay is $4288.75; Net pay is $2939.78
Expenditures
 The net pay you earn is used for various
expenditures throughout the month.
 Financial Experts recommend not
spending more than 30% of your gross
pay on rent/mortgage per month and
about 12% on food throughout the
month.
 Monthly costs
 Variable costs
 (utility bills, credit card bills, etc.)
 Fixed costs
 (rent, mortgage, car payments, etc.)
Other Expenses
 In addition to monthly expenses, it is wise to put some money
aside for savings and investments.
 Savings accounts can be used to help you save money.
 You can also invest in retirement accounts or in the stock
market to help earn wealth over time.
 Many people also choose to set aside money each month for
charitable giving.
 Charitable donations frequently come with tax benefits – if you
donate a certain amount thru the year, you can write it off on your
taxes and earn a higher tax refund.
Balancing Your Checkbook
Bank Accounts: Checking
 Checking Accounts– money is typically
deposited either automatically or by
the individual each month into an
account meant for daily use.
 Debit card
 Individuals can also use paper checks.
 Typically no interest earned in a
checking account.
Writing a Check
1. The date the check is written
2. Pay “to the order of”…Who is getting paid
3. The amount written in numbers
4. The amount written in words (must end in **/100)
5. Memo note – to remind yourself what it’s for or to let payee know information
6. Signature Line
7. Check Number
8. Bank Routing Number
9. Your Account Number
Bank Accounts: Savings
 Savings Accounts are set up to be
used to help individuals SAVE money.
Money in these accounts is not meant
to be spent every day.
 Money can easily be transferred
between checking and savings
accounts, so individuals usually go in
and move the money to a savings
account once they are paid.
 Many banks penalize individuals who
draw money out of accounts too
often.
 Typically do offer low interest
payments to help individuals save
money more quickly.
Savings Accounts: Money Market
Accounts
 A Money Market Savings Account
is a type of savings account that
usually earns a higher amount of
interest than a basic savings
account.
 (Example: You are permitted to
make no more than six transfers
and/or payments to another
account of yours with your bank or
to a third party each monthly
period.)
 Can close the account at any time
with no penalty
Bank Accounts: Certificates of
Deposits (CDs)
Time Deposits vs. Demand Deposits
 A Time Deposit is a deposit put into an
account at a bank that cannot be touched
for a specific amount of time (CD, for
example).
 Advantage for the bank – more time to
draw interest
 Advantage for the consumer – more
interest than other savings or checking
accounts
 By contrast, a Demand Deposit is a
deposit put into an account at a bank that
can be withdrawn at any time.
 Advantage for the consumer –
convenience
 Disadvantage for the consumer – less
interest than a CD or Savings account
Bank Security
 Bank accounts are backed up by the federal government up to
$250,000 by the Federal Deposit Insurance Corporation so even if
a bank goes bankrupt your money is safe.
 Credit Union accounts are backed by the National Credit Union
Association for the same amount.