setting financial goals

Building: Knowledge, Security, Confidence

Setting Financial Goals

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Does this sound familiar……?

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Today, we will…

• Learn how to manage money by preparing a personal spending plan (budget)

• Identify ways to decrease spending and increase income

• Avoid debt!

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After today…

• Track your daily spending habits

• Prepare a personal spending plan to estimate monthly income and expenses

• Explore ways to decrease spending and increase income

• Use budgeting tools to help you manage your money

You will be able to:

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What is a Spending Plan?

Having a Spending Plan is:

• The best way to take control of your financial situation

• About choices – choosing how to make and spend money

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Why have a Plan?

Usually for 1 month

Usually for 1 month

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Preparing a Spending Plan

Having a Spending Plan is about:• Choosing how to

use your money – now and for the future

• Knowing what your income and expenses are every month

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Set Your GoalsWant to save for a new car or a fantastic vacation? Consider your goals when planning a budget:

• Be realistic

• Be specific

• Have a time frame

• State the action to be taken

• Set milestones

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Four Steps to Preparing a Spending Plan

1. Keep track of your daily spending

2. Determine what your monthly income and expenses are the month before they are due

3. Decrease spending

4. Increase income

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Step 1: Keep Track of Daily SpendingMany people spend all their money…

and have no clue where it went!

• Where did your $50 go?• Do you know exactly what

you bought? Where it all went?

• Let’s go to the mall…

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Daily Spending Diary

Control Your Money!Watch your spending closely by using a

spending diary or log:

• You’ll see where your money goes

• You’ll be able to cut expenses to save for goals

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Activity 1: Daily Spending Diary

– Write down what you spend in a typical day

– Keep track of everything you spend – no matter how small the amount!

– Do this for 1 month– Expect to be surprised…

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Step 2: Your Income & Expenses

Income comes in the form of:

• Allowances• Wages from a job• Miscellaneous work (like cutting

grass)• Interest and dividends from

investments

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What You REALLY Earn: Income

• Your employer must subtract certain taxes from your paycheck

• The time it takes to meet goals for saving may increase

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Gross Income: Total income without deductions

Net Income: Gross income after deductions or subtractions, such as Social Security and other taxes

What You REALLY Earn: Income (cont’d)

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Expenses

Expenses: Everything you pay for in a time period

There are two types of expenses:

– Fixed

– Flexible

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Fixed Expenses do not change• Car payment• Rent

Flexible Expenses might change• Electricity• Food• Clothing or entertainment

Expenses (cont’d)

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Expenses: items you pay for each month

• Housing & car payments

• Insurance/Utilities• Food & clothing• Cell phone bills• Personal, child or

pet care

Step 2: Your Income & Expenses

• Eating out • Entertainment• Education costs

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ATM Fees Computerware Parties Cosmetics

Online Services Nail Services Sneakers

Cell Phones Dating Ice Cream Parking FeesCDs

Gifts Bottled Water Bounced Checks Clubs

Cigarettes Greeting Cards Tanning Haircuts Videos

Cable TV Late Payment Fees Dinners OutGasoline

Books Fast Food Attacks Dry Cleaning Car Wash

Lottery Tickets Magazines Movie Rentals Sports

Lunches Out iTunes Gambling Prescriptions

Household Items Pet Costs Licenses Speeding Tickets

Cash Advance Fees Munchies Vending MachinesSouvenirs

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Activity 2: Monthly Income & Expense Worksheet

– You will list all of your income & expenses on this worksheet

– You may need to check your bills or invoices at home for exact amounts

– Estimate expenses that do not occur on a monthly basis

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Step 3: Find Ways to Decrease Spending

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What are some ways we can decrease our spending?

Step 3: Find Ways to Decrease Spending

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• Carrying limited cash and controlling your debit/credit card use

• Not shopping “for fun”

• Remembering your spending plan & savings goals

• Buying only what you need

• Paying your bills on time to avoid extra fees and charges

You can decrease spending by:

Step 3: Find Ways to Decrease Spending

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What are some ways we can increase our income?

Step 4: Find Ways to Increase Income

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Step 4: Find Ways to Increase Income

• Get a job (if you don’t have one)

• Ask for a raise, if you have a job

• Get a better paying job• Get a second job • Do freelance work• Sell some of your stuff!

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Your Spending Plan Tools

These tools will help you manage your spending plan:

• Monthly payment schedule

• Monthly payment calendar

• A computer spreadsheet

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A monthly paymentschedule and a monthlypayment calendar will helpyou:

• Record income in advance

• Plan ahead to pay your bills

Spending Plan Tools (cont’d)

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Activity 3: Monthly Payment Schedule

– Use the Income and Expenses Worksheet to transfer info

– Complete due dates and amount due in columns

– Enter the date when expense has been paid

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Activity 4: Monthly Payment Calendar

Use the Monthly Payment Schedule to fill in your calendar:•Transfer income sources & amounts to the dates income is paid•Transfer your expenses to the dates they are due•Use one color ink for income and a different color for expenses•Check off each bill as it is paid

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Monthly Payment CalendarMonth: June 2010

Sunday Monday Tuesday Wednesday

Thursday Friday Saturday

1 2$300 paycheck$25 savings$20 expenses

3$100 car insurance

4 5$25 interest

6$50 cell phone

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8 9$300 paycheck$25 savings$20 expenses

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$25 gas11 12 $20 haircut 13 14

15 16$300 paycheck$25 savings$20 expenses

17 18$150 carpayment

19 20$20 gift card

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22 23$300 paycheck$25 savings$20 expenses

24 $25 gas 25 26 27$20 Sun Pass

28$40 entertain-

ment

29 30 $300 paycheck

$25 savings$20 expenses

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Help! I Can’t Pay My Bills!

Scenario: You add up your bills and the total is $900, but your income is

only $600….

What do you do?

Think about the bills that would

be the most important!

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Help! I Can’t Pay My Bills! (cont’d)

If you have to choose, think of major obligations first:

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Activity 5: A Hole in Todd’s Pocket

Can we come up with 6 ideas to help Todd?

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Spending Plans rock!

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Setting Financial Goals

• How to track what you spend each day• How to prepare a personal spending

plan (budget) to estimate monthly income and expenses• Ways to decrease spending and

increase income• About tools for better money

management

Congratulations! You have learned:

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Knowledge Check

1. The main reason why it is helpful to track daily spending habits is to:a. Spend moreb. Know exactly how your money is spentc. Increase your incomed. Decrease your spending

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Knowledge Check

2. Before you prepare a spending plan, the two most important things you must know are:a. Total income and expensesb. Your car payment and gasc. How to budget for entertainmentd. What your cell phone costs

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Knowledge Check

3. A personal spending diary will help you to:a. Spend more moneyb. Borrow moneyc. Keep track of where you spent your moneyd. Keep your spending a secret

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Knowledge Check

4. If you’re having trouble meeting your expenses, you should first:a. Stop paying your billsb. Take a payday loanc. Pay your rent or mortgaged. Buy something to make yourself feel better

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Thank you!

American Debt Counseling, Inc.American Debt Counseling, Inc.1 888 DEBT USA1 888 DEBT USA

www.americandebtcounseling.orgwww.americandebtcounseling.org