Unit 5Budgeting

Financial Goals/Plans

Determine Career and earnings

Living Arrangements-type? Where?

Family Life Choices-Family or not

Lifestyle Choices-Free time away from work

Fiscal Plans-financial stability, retirement

Budgeting

Definition-is a plan for dividing income among spending and savings options.

Reasons for Budget

To guide you in the right direction

Lets you control your money better than the other way a round

Will tell you if you live in your means

Helps you to met savings goals

Reasons for Budget

Reveals where you spend money which may help you to revise your spending plans.

Keep you out of debt or help you to get out of debt.

Reasons for Budget

Frees up cash to be used on desired wants

Focus on common goals for all

Prepare for emergencies

Budgeting 3 Main Parts

Timeframe-the time that the budget is created for-weeks, months, years.

Income-money that is brought in

Expenses-money that is spent

Income

Determine sources-job, other revenue

Determine amounts-using tax information

Determine frequency of payments

Income Types

Gross Income-money earned before taxes Your earn $10 an hour

Net Income-money earned after taxes After taxes $10.00 SS 6.2%, Fed 10-35%, Medicare 1.45%,

IL 5% Total Pay $7.23 per hour

Expenses

Determine the various items where money is spent

Determine amounts

Determine categories

Expenses-two types

Fixed Expense-the same amount each time it is spent

Ex: Mortgage (rent), Car payment

Variable Expense-will have various amount spent each time

Ex: Utilities-power, water

Steps to Creating a BudgetChose financial goals.

Track income and expenses.

Prepare a budget worksheet.

Review and adjust your budget worksheet.

Steps to Creating a BudgetDetermine a timeframe of

measurement

List income and expense amounts

Determine categories of expenses

Put amounts in categories

Debt

Credit Card Debt

Overextended loans

Paycheck to paycheck

Bankruptcy

Chapter 7-Liquidation

Individuals-get to keep house-credit rating is poor for at least 7 years.

Businesses-Go completely out of business

Easiest and fastest way to settle debts State Law determines what a debtor

gets to keep-the rest of assets are sold to pay debts.

Bankruptcy

Chapter 11: Reorganization

Individuals or Business

Payment plan for debts

Debtor gets to retain control of assets, but make plan that is approved by the court

Poor credit rating for 7 years

Bankruptcy Chapter 13: Wage Earner Plan Individual or small businesses Owes less than $807,750 in secured debt or less

than $269, 250 in unsecured debt Wage earner plans give debtors the chance to

continue operation and get back on their feet. Debtors do not give up their current assets and

property to pay debts; Agree to an established and monitored payment

plan Use their future income to pay creditors over

time.