BASIC FINANCE AND BUDGETING
Taking Control of Your Finances Monitoring your personal finances and budgeting can help you: Get organized Gain control of your money Save money Reduce or avoid debt It is extremely important to be aware of your spending habits and fully understand the financial limits within which you must live. A personal spending plan, or budget, is essential for you to monitor your cash flow each month and take control of your finances.
Getting Started – Identify Income In order to properly manage your own finances and create a budget, you must first identify your sources of income. Possible Income Sources: Wages and Salaries Bonuses and Commissions Government Benefits Veteran’s Benefits Worker’s Compensation Unemployment Compensation Social Security Alimony and Child Support Tax Refunds Scholarships Interest and Dividends Pensions
Getting Started – Identify Expenses After you have calculated your total income, you need to determine how much you spend. Keep everything! ○ Bills, receipts, etc. Create a spending log. ○ Write down all of your expenditures in one place. A simple notebook or spreadsheet both work well. Revisit your spending log. ○ Every time you spend money, update your spending log.
Getting Started – Identify Expenses Fixed Expenses, Variable Expenses, and Future Expenses Determine how much you MUST spend. Needs v. Wants Budgeting Tools
Common Expenses Food Clothing Shelter Child Care Contributions Transportation / Parking Healthcare / Prescriptions Personal Care Educational Costs Entertainment / Activities Gifts Installment Payments Insurance Utilities Miscellaneous
Determining Your Fixed Expenses are those expenses that are paid at regular intervals in a fixed amount. Common examples include: Rent/Mortgage Payments Car/Truck Payments Insurance ○ Auto Insurance ○ Renter’s/Homeowner’s Insurance ○ Health Insurance Others?
Determining Your Fixed Expenses • Rent/Mortgage* Payments – Sample Rental Rates – Brandywine Apartments: $685 - $885 per month – Woodfield Apartments: $605 - $1, 005 per month – Residences at Rodney Square: $869 - $2, 130 per month – Pine Grove Apartments: $770 - $950 per month – Village of Westover Apartments: $839 - $1, 099 per month *Additional information on buying a house and related financing tips are available by contacting the Delaware Bankruptcy Inn of Court.
Determining Your Fixed Expenses Car/Truck* Payments Sample: $500 per month *Additional information on buying a car/truck and related financing tips are available by contacting the Delaware Bankruptcy Inn of Court.
Determining Your Fixed Expenses Insurance Payments Renter’s/Homeowner’s Insurance ○ Sample Renter’s Insurance Payment: $40 per month ○ Sample Homeowner’s Insurance Payment: [$XXX] per month Health Insurance* ○ Sample: [$XXX] per month *Additional information on children’s health insurance and other healthcare resources are available by contacting the Delaware Bankruptcy Inn of Court.
Determining Your Fixed Expenses Insurance Payments Auto Insurance ○ Sample: $100 per month ○ It’s cheaper (and easier) to pay less often. $250 per quarter v. $450 twice per year - $100 x 12 = $1, 200 - $250 x 4 = $1, 000 - $450 x 2 = $900
Determining Your Fixed Expenses Others Ask yourself: Do I have any other expenses every month/quarter/year that do not change? ○ Examples: Cable/Satellite Television? Internet? Furnishings? Parking?
Make a List of Your Fixed Expenses Sample: Rent = $800. 00 Car Payment = $500. 00 Auto Insurance = $130. 00 Renter’s Insurance = $40. 00 Parking = $145. 00 Other = _______ Total Monthly Fixed Expenses = $1, 615. 00
Determining Your Variable Expenses What bills do you get/expenses do you have that are different amounts each month? Examples: Groceries Electricity Gasoline Telephone Entertainment Tracking and looking back through records and receipts will be necessary to establish realistic figures for your variable expenses.
Determining Your Variable Expenses • Electricity – Save your electricity bills. – How much is the bill each month? • January = $137. 45 • February = $147. 34 • March = $183. 20 • April = $125. 46 • May = $155. 67 – Average the monthly bills: – $149. 82 is the average amount
Determining Your Variable Expenses Tips on Managing Electricity Charges Get on a budget plan ○ https: //www. delmarva. com/home/billing/paym ent/budget/default. aspx Turn lights off when you leave the room. Do not have the T. V. on when you are not watching it.
Determining Variable Expenses • Groceries – Save your grocery receipts. – How much is the grocery bill each month? • January = $525. 05 • February = $430. 24 • March = $357. 89 • April = $421. 34 • May = $505. 28 – Average the monthly grocery bills: $447. 96 is the average amount of the grocery bill.
Determining Your Variable Expenses • Tips on Managing Your Grocery Bill – Go to the grocery store on a weekly or bi-weekly basis. – Buy only what is on sale (get a savers card) • Why pay full price if you don’t have to? • Make your meals around what you can buy cheaply, not what you have a craving for. • If chicken is on sale instead of pork – buy chicken! • Be proactive – if an item is on sale, you use it, and it will not expire – buy it, then you won’t have to get it next week when it is no longer on sale.
Make a List of Your Total Variable Expenses Cell phone = $ 125. 35 Electric = $ 149. 82 Groceries = $ 447. 96 Gasoline = $ 225. 00 Entertainment = $ 197. 00 Other = $ Total of Variable Expenses = $1, 145. 15
Future Expenses What other expenses do you have? Home repairs? Car tags and maintenance? Medical expenses? Dental expenses? School supplies? Others?
Plan for Future Expenses On average, car repairs and maintenance cost $652. 00 per year/ $54. 33 per month. How much did you spend last year on dentist bills? How much did you spend last year on medical bills? Factor these into your budget!
Plan for Future Expenses Develop a list of financial goals: Short-term goals – things that you hope to accomplish over the next couple months Mid-term goals – things that are attainable within the next couple years Long-term goals – things that are likely to take longer to achieve (college tuition) Emergency Fund An emergency fund is money that is set aside to cover unexpected expenses. Every spending plan should have an emergency fund that is 2 to 3 times your monthly income.
Making a Budget • Once you have calculated your total monthly income and total monthly expenses, you can prepare your budget. • Total Monthly Fixed Expenses = • Total Monthly Variable Expenses = • Total Monthly Future Expenses = • Total money coming IN (Income) = • Total money going OUT (Expenses) = $1, 615. 00 $1, 145. 15 $150. 00 $3, 200. 00 $2, 910. 15
Savings Based on the budget above, a deposit into savings each month should be $439. 85 $3200. 00 - $2910. 15 Budgeted costs Total to Savings = = = $289. 85 $150. 00 $439. 85
Sample Budget Distribute a sample budget with numbers filled in.
Needs v. Wants Identify what on the worksheet from the prior slide is a Need and what is a Want?
Evaluation Take the sample worksheet and cross out the Wants.
Total Savings After Evaluation After you subtract your Wants, your new monthly budget/finances look like this: Increase in Savings of $______
Maintaining Your Budget Once you have created your budget, it is important to maintain a good record-keeping system. Also, remember to update your budget regularly to reflect any changes in income or expenses. If necessary, refine your monthly expenses to live within your means. The key is identifying family and financial priorities, realizing the costs involved, and maintaining a budget that is based on accurate information and established priorities.
Other Ways to Cut Costs: There are many ways to reduce your monthly expenses to help you live within your means and save money. Here a few tips: Put aside every coin you touch Eat more meals at home / pack lunch Stick to your shopping list Use public transportation Use coupons for needed items Buy generic or store brands Compare unit pricing for best value Consider buying used furnishings
Other Ways to Cut Costs Handle more home maintenance yourself Change AC and furnace filters every month Use utilities and household supplies less Cut down on expensive hobbies or activities Take advantage of free activities / library Compare insurance companies to find best rates
Additional Resources Delaware Office of the State Bank Commissioner – Consumer Education http: //banking. delaware. gov/services/conedu/toc. sht ml Federal Deposit Insurance Corporation: Money Smart http: //www. fdic. gov/consumers/consumer/moneysma rt/index. html Delaware Health and Social Services, Division of Services for Aging Adults with Physical Disabilities: Money Management http: //dhss. delaware. gov/dhss/dsaapd/money. html
Additional Resources Delaware Financial Literacy Institute http: //www. dfli. org/index. cfm Delaware Money School http: //www. delawaremoneyschool. com/index. cfm First State Saves http: //www. firststatesaves. org/ Delaware Bank at School http: //www. bankatschool. com/history. html From Purses to Portfolios http: //www. pursestoportfolios. com/
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