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HEAVEN’S HARVEST

MINISTRIES – FINANCE NIGHT

Created by: Jennoa R. Graham, Ph.D.

Managing Household Budgets

Presented by: Pastor Thomas Pulliam, Sr.

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KEY TERMINOLOGY Income – Money that is received in

exchange for a product, service or contract agreement

Expense – Money that is paid out in exchange for a product, service or contract agreement

Budget – A document used to estimate current or future income and expenses for the purpose of managing money to avoid deficits and achieve specific financial goalsIncome – Expenses = Surplus

(Deficit)

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OVERVIEW Set a financial goal

Short Term - Do not overdraw checking accountLong Term - Save for special occasion or trip

Determine income and expenses for budget

Create a plan to meet financial goal

Track and analyze budget activity

Review and modify plan as needed

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INCOME - TYPES “Any income, from whatever source, is

presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded” (IRS, 2012)

Payroll Check

Tips* (all denominations)

Retirement Distribution*

Grants/ Scholarships*

Social Security

Child/ Spousal Support

Legacy/ Endowment*

Veteran's Assistance

*See financial or tax advisor

Taxable

Non-Taxable

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INCOME – GROSS VS. NET Gross Pay – The amount of money

earned BEFORE taxes and withholdingsFederal

Withholdings Medical Social Security (OASDI)

StateLocal (not applicable for GA)401K/IRA/ROTH/PensionGarnishments

Net Pay – The amount of money received AFTER taxes and withholdings

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EXAMPLE Blended family with three children

Child #1 – Outside of home; Spouse #1 pays child support Child #2 – Inside of home; Spouse #2 receives child support Child # 3 – Inside of home; product of union

Summary of income Spouse # 1 earns $50,000 annually Spouse # 2 earns $35,000 annually

Modest standard of living expenses

Goal: Eliminate overdraft fees on bank account

Plan: Pay expenses only when income is received & reconcile bank account to receipts weekly

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INCOME - SOURCES Determine frequency of income sources

Daily Weekly Monthly Annually

Create a spreadsheet that identifies the days each source of income is expected and the estimated amount to be received (Net Pay)

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NET PAY

Base Pay - Spouse #1 Base Pay - Spouse #2

Current Gross 4,166.67 Current Gross 2,916.67

Taxes (25%) (1,059.35) Taxes (25%)

(741.55)

Deductions (8%) (334.71) Deductions (6%) (175.97)

Child Support (350.00)

Net Pay 2,422.60 Monthly Net Pay 1,999.15 Monthly

Net Pay 1,211.30 Bi-Monthly Net Pay 999.58 Bi-Monthly

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9/1/2012 9/16/2012 10/1/2012 10/16/2012

Income

Spouse # 1 Payroll Check 1,211 1,211 1,211 1,211

Spouse # 2 Payroll Check 1,000 1,000 1,000 1,000

Child Support 150 150 150 150

Total Income 2,361 2,361 2,361 2,361

Model Budget Income

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EXPENSE Monthly expenses can be grouped and

estimated as a percentage of income

HHM Recommendation USA Visa Recommendation**

Percentage of Income Household Expense Percentage of Income Household Expense

20% Housing 30% Housing

18% Transportation 18% Transportation

15% Food 15% Food

10% Tithe/Offering * 8% Miscellaneous

10% Savings 5% Clothing

5% Clothing 5% Medical

5% Medical 5% Recreation

5% Recreation 5% Utilities

5% Utilities 5% Savings

7% Other Debts 4% Other Debts

* “…he which soweth bountifully shall reap also bountifully… for God loveth a cheerful giver”

(2 Corinthians 9:6-7)

** http://usa.visa.com/personal/using_visa/personal_finance/budgeting.html

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Model Budget Expenses

9/1/20129/16/201

210/1/201

210/16/201

2 Expenses Transfer to Savings 236 236 236 236 Tithe/Offering 236 236 236 236 Mortgage/Rent 350 350 350 350 Lights 115 115 - Water 80 - 80 Child Care 180 180 180 180 Food/Clothing/Materials 225 225 225 225 Life Insurance 100 - 100 - Homowners/Rent Insurance 75 - 75 - Car Note - 630 - 630 Car Insurance 375 375 - Car Gas 125 125 125 125 Cell Phone 125 125 - Cable 100 - 100 - Student Loans 100 100 100 100 Recreation 150 150

Unexpected Expenses Medical Copays - - - - Car Water Pump - - - - Total Expenses 2,342 2,312 2,342 2,312

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EXAMPLE - RECAP Set a financial goal

Eliminate overdraft fees on bank account

Determine income and expenses for budget

Model Budget Income & Expenses

Create a plan to meet financial goalPay expenses only when income is receivedReconcile bank account to receipts weekly

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SURPLUS (DEFICIT) Modifying payment of expenses to coincide

with dates of income received and monitoring bank account activity regularly, can help to eliminate overdraft fees

9/1/2012 9/16/201210/1/201210/16/201

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Total Income 2,361 2,361 2,361 2,361

Total Expenses 2,342 2,312 2,342

2,312

Net Balance 19 49 19 49

Success!!!

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WHAT WOULD YOU DO? Track and analyze budget activity

____________________________________________________________________________________________________________________________

Review and modify plan as needed _____________________________________________________________________________________________

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REFERENCES IRS (2012). The Meaning of Income:

Taxable Income and Gross Income. Internal Revenue Code, Retrieved August 30, 2012, from http://www.irs.gov

Visa (2012). Budget Overview. USA Visa, Retrieved September 1, 2012, from http://usa.visa.com

Holy bible: King James Version. (1995). Michigan: The Zondervan Corporation