the need for effective money management. basic economic problem zlimited financial resources and...
TRANSCRIPT
The need for Effective Money Management
Basic Economic Problem
Limited Financial resources and unlimited wants/needs
Applies to consumers, businesses and government
Importance of Budgeting
A plan for saving and spending Helps achieve financial goalsWill help avoid credit card
problemsGood financial records must be
maintained.
Must be evaluated from time to time.
Fixed Expense
Occur Regularly Same amount each time
Variable Expenses
Differ each timeMay be a one time
bill/payment
The Budgeting Process
Set Financial Goals
1. Short-term and long-term 2. A balance sheet-or statement
of net worth Balancesheetexample.xlsCash flow statement (or income
statement) help in establishing goals.
3. The choice of lifestyle will affect the goals.
Plan the Budget CategoriesThe cash flow statement can help establish
categories and allowances for each category. Fixed expenses- occur regularly at the same amount
ExampleVariable expenses- costs differ each time
Examples
• Savings are an essential category•Necessary for long-term goals. •Helpful for unexpected expenses such as medical
Maintain Financial Records
A checking account will help in maintaining financial records
Evaluate the Budget
Compare actual expenditures with budget allowances
Adjust the budget when necessary *Reasons: Change in family situationsChange in lifestyle choicesInflation, inaccurate budgeting estimates
Characteristics of an Effective Budget
Realistic
1. Should reflect current income.
2. Expenses should be reasonable according to income
Flexible 1. The budget should allow for
unexpected expenses2. Savings are essential for
flexibility
EVALUATE REGULARLY
Planned & Communicated to all affected by the budget
- Budget should be written
- Written budget should be accessible
SIMPLE FORMAT