managing your personal finances- unit 7 – creating a budget

MANAGING YOUR PERSONAL FINANCES-

Unit 7 – Creating a Budget

DO NOW• Have you ever tried to predict the future?

• Were you right in your prediction?

• What are some common things people try to predict?

• What goes into a good prediction?

DO NOW- Challenge Question• Why do some people actually look to the past to predict

the future?

Standards7.1. Students will be able to describe and complete a student based budget.

LESSON GOALS**I can identify qualities of a good Budget.

**I can create a student-zero balanced budget.

Vocabulary• Zero-balance budget: all dollars of your total income is allocated to different expencategories (of your budget). Every dollar has a purpose!

• All budgets are forward looking. It is a forecast of future income and spending.

• A budget provides a spending guidline.

Quick fact• Studies show that when people record their financial goals

they automatically increase their chances of accomplishing them.

•What makes this true?

Categories of expenses

•Fixed Expenses-a payment that remains the same month after month or year after year (examples: rent, loan payments)

•Variable Expenses- a payment that changes from month to month (examples: auto repairs, clothing)

Personalize• What expenses in your home vary?

• Do any of your sports or other activities have expenses that vary?

• What expenses in your home stay fixed?

• Do any of your sports or other activities have expenses that are fixed?

Budget (Expanded Definition)• Budget: a plan for how to use your money. • It is done on a month to month basis. • It also includes both fixed and variable expenses that you must

pay during that time period. • It should also align with your personal goals and values.

Characteristics of a Good Budget:

•It is written down•It is practical•It is flexible(adjustments are made on a monthly basis).

•It is easily accessible.

Cash FlowRemember, cash flow is how much money you will bring in (your income) and how much you will spend (your fixed and variable expenses) during a particular period of time.

Inflow-Outflow

Recommended Budget PercentagesI Item Recommended

Housing 25-35%

Utilities 5-10%

Food 5-15%

Transportation 10-15%

Clothing 2-7%

Medical/Health 5-10%

Personal 5-10%

Recreation 5-10%

Debts 5-10%

Savings 5-10%

Charitable Gifts 10-15%

Step 1: Calculate Marcus’ income.

•Marcus makes $8.50 an hour.•He works 25 hours a week • 20% is taken out of his salary for taxes. Calculate Marcus’ Gross Monthly Income:1. Weekly Gross income: ($8.50 * 25)$_______________2. Net Monthly income: (Weekly Gross * 4)$_______________3. Deduct 20% for Taxes $_______________4. Monthly Gross Income $_______________

Let’s create a student budget for Marcus:

  Monthly Yearly

Income:    

Expenses:    

Cell phone    

Car Insurance    

Gas/repairs/maintenance    

Clothing    

Recreation    

Personal care    

Charitable Gifts    

Savings:    

College Fund    

New Car    

Reflection:

1. Why is getting to zero considered success in our student budget?

2. Which items do you think will be your greatest expenses?