power of paycheck planning
DESCRIPTION
This informative and entertaining seminar will show you how to take control of your finances by learning to budget your paycheck - before you spend it.TRANSCRIPT
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The POWER of PAYCHECK PLANNING
www.credit.org
Promoting Financial Literacy
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About Springboard
Springboard is a non-profit organization founded in 1974.
We offer personal financial education and assistance with money, credit, and debt management through educational programs and confidential counseling.
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About Springboard
Accredited by the Council on Accreditation (COA)
Member of the National Foundation for Credit Counseling (NFCC)
Certified by the Department of Housing and Urban Development (HUD)
Member of the Better Business Bureau (BBB)
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Our Services Include
Credit and Debt Counseling Financial Education Programs – Seminars
and Materials Debt Management Plans Homeowner Assistance (Foreclosure
Prevention) First Time Home Buyer Education Seminars Reverse Mortgage Counseling Pre-Bankruptcy Budget and Credit
Counseling Pre-Discharge Financial Management
Instructional Course
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Introduction
Surveys show that only 12% of high school seniors learn about money management in school.
Historically, it has been up to parents to teach their children the skills needed.
Most of us learn these lessons the hard way after we’ve moved out on our own and made some mistakes.
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First Steps
Stop incurring new debt Live on a cash basis Get a handle on your situation Relax
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What is a Budget?
A budget (spending plan) is a plan to figure out where your money goes before you get it.
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Where to Begin When Creating a Budget:
How much do you earn?
How much do you spend?
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Track Your Spending!
Track ALL spending for at least 90 days
Write down even the smallest expenditure
Transfer expenses to the monthly tracking sheet to summarize and view by category
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Use the forms provided in this book or
Carry a small notebook Keep your receipts in a
separate envelope for each day
Use software like Microsoft® Money or Quicken® (chances are you already own one of these applications if you own a personal computer)
Daily Tracking Sheets
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Housing Food Insurance Medical Auto Child Support Taxes Personal Savings
Tracking Sheet for Monthly Expenses
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Creating Your Budget
Three things you need to know: IncomeExpensesGoals
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Job Spouse’s job Part time job Rentals Commission/bonuses Child support/alimony Investments
Track All Your Sources of Income
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Categorizing Your Expenses
The two most important categories of expenses are needs and wants.
Necessary expenses are your needs. Discretionary expenses are your
wants. The rule to bear in mind is this: Anything that
is necessary for you to earn a living is a need.
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Necessary Expenses
Housing (include utilities, taxes, insurance)
Food Insurance (medical/dental/life) Medical Transportation (include car insurance) Child care Taxes Savings
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Discretionary Expenses
Personal care, clothing, jewelry Entertainment (include cable TV!) Miscellaneous
Pet care Gifts Cell phone Cigarettes/Alcohol Charitable giving Internet access
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Periodic Expenses
Insurance premiums Taxes DMV registration Gift giving
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Debt Payments
Credit Card Payments Personal Loans Student Loans Any Other Debt Payments
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Debt Repayment
After you divide your necessary from your discretionary expenses, you aren’t done categorizing your spending.
This usually takes the form of credit card bills, though auto loan repayments and personal loans would also count.
Take each debt and figure out a monthly payment amount that will allow you to pay off your debts as quickly as possible.
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Debt Repayment
For your auto loans, this is your established car payment.
For your credit cards, don’t just send the minimum monthly payment; if you do, you’ll be paying toward that debt for the next 30 years. For example, say you owe $6000 on a credit card.
Over four years, or 48 months, you’d pay $125 per month to wipe out the debt. If that amount is too large for your budget, you can adjust the payoff term to something longer, like 5 years. (Then you’d only have to pay $100 per month.)
Whatever you do, though, don’t stretch out the payoff term so much that you’re just making minimum payments.
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Setting Goals
A short–term goal should be accomplished within one year.
A mid-range goal takes between 2 and 5 years to accomplish.
Long-term goals take over 5 years to achieve.
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Goal Strategies
Competition Cooperation Attempts Don’t be too
Flexible
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Adding It All Up
Now it’s time to put everything together and see whether your budget will work.
Remember, your short, mid and long term goals should be included with your expenses on your budget.
Total Necessary Expenses
+ Total Discretionary Expenses + Total Debt Payments = Total Monthly Expenses
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Now Let’s See if Your Budget Balances
Total Monthly Net Income
- Total Monthly Expenses
= Surplus (+) or Deficit (-)
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If Your Expenses Exceed Your Income Work to find solutions Credit counseling can help if you have high debt
payments that are upsetting your budget. Whatever you do, don’t cut into the 10% - 15% you
should be saving; you need to save up to three – six total month’s of expenses to get through an emergency
Re-evaluate your budget periodically, especially when your income or needs change.
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What Your Spending Should Look Like
Housing 35-45% Utilities 8-15% Food 10-20% Transportation 15-25% Medical 8-15% Clothing 3-5% Personal & Misc. 5-10% Savings 5-10% Monthly Installments 10-20%
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Now that you’re more familiar with your income, expenses, and goals, it’s time to propose a monthly budget.
Monthly Budget
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Balancing that Budget
Continue to track spending for another 30-60 days to plug budget “leaks”.
Wants vs. Needs – know the difference! Ask before you buy: “How did I get along
without it?” Plan ahead and curb those impulse buys. Include your family in budget discussions
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Budget Busters
Food Dine out too often
Five times more expensive than making it yourself Grocery shopping
Entertainment Impulsive nature of it Movies - #1 entertainment outlet
Retail Shopping Paying too much for things Buying what you don’t need Shopping as a form of entertainment
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Increasing Income and Reducing Expenses
Make sure you control your money, not the other way around
Rework your budget as needs, priorities, income, and expenses change
Try some of these tips to reduce expenses for You and Your home Your phone Your transportation When grocery shopping
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Shopping with Coupons
Coupons can be a valuable tool to help consumers save money at the grocery store.
But coupon shoppers have to be careful; coupons can be advertising devices designed to get you to purchase high-priced name brand items that are still more expensive than the brands you normally buy.
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Where Do You Get Coupons?
Wednesday and Sunday • Sunday paper, except before holidays
Grocery store coupons on flyers, mailer coupons, Coupons enclosed in products. Magazines Boxes You can also find coupons online:
Couponcabin.com Ebates.com Keycode.com Ecoupons.com
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Shopping Smarter
Planning ahead can make the difference when retail shopping. Use the calendar
as a rough guide for when to find seasonal sales or discounts
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Serious Spending Issues – Compulsive shopping vs. Impulsive shopping
10 signs of Compulsive shopping To relieve anger or depression Spending disrupts normal life Conflict with loved ones Lying to family & friends Feelings of elation Taking cash from others – purchasing on your own
credit card Feels like something forbidden Guilt or shame Purchase never unwrapped or used Purchasing on credit for items wouldn’t spend with cash
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Your Credit Report
The FACT Act of 2003 mandated that the three major national credit-reporting bureaus establish a website, a toll-free number and a mail address for consumers to request their credit report for free every year:
*You may also purchase your score at this website for a small fee. www.annualcreditreport.com 877-322-8228
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Getting Your Report
If you’ve been denied credit because of what your credit report says, you are also entitled to a free copy of the credit report used in the decision - within 60 days of the denial.
Contact the credit bureaus directly Equifax – www.equifax.com Experian – www.experian.com TransUnion – www.transunion.com
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Opt Out of Prescreened Offers
If you would like to stop receiving offers of new credit you may Opt Out. www.optoutprescreen.com 1–888-5OPT OUT
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Thank You!
Springboard Nonprofit Consumer
Credit Management
www.credit.org
800-947-3752
4351 Latham St. Riverside CA. 92501 www.credit.org