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Chapter
© 2010 South-Western, Cengage Learning
Budgets andFinancial Records
8.18.1 Budgeting and Planning
8.28.2 Legal Agreements andRecord Keeping
8
© 2010 South-Western, Cengage Learning SLIDE 2
Chapter 8
Learning Target:
Explain the purpose/benefits of understanding and utilizing financial planning.
Create a personal budget.
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Chapter 8
Financial Planning BasicsHelps us….PlanBudgetKeeping good records
A financial plan is a set of goals for spending, saving, and investing the money your receive.
© 2010 South-Western, Cengage Learning
What is a Budget?
A list (typed or written) of what you will or expect to spend your money on
A tool utilized to help individuals stay out of financial trouble
Something everyone should create, monitor and update for themselves on a monthly basis
© 2010 South-Western, Cengage Learning
What does a Budget compare?
INCOME
EXPENSES (Fixed – Variable)
Giving us a “MONTHLY TOTAL”
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Chapter 8
Monthly Budget
Fixed expenses are costs that do not change from month to month.
Variable expenses are costs that vary in amount and type, depending on the choices you make.
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Chapter 8
Getting Started Income = money coming “IN”
Gross Income Net Income Disposable income
$ you don’t have “earmarked”Money Going “OUT”
Expenses = money going “OUT” Bills or Financial Obligations
© 2010 South-Western, Cengage Learning SLIDE 8
Chapter 8
Preparing a Budget A budget is a spending and saving plan based on your
expected income and expenses.
PROS Helps you plan Helps you save money Less Stress Keeps you organized
CONS Takes Time
© 2010 South-Western, Cengage Learning SLIDE 9
Chapter 8
Steps in Preparing a Budget
1. Estimate your income.
2. Estimate your expenses.
3. Decide how much to save.
4. Select your budgeting tool.
5. Balance your budget.
© 2010 South-Western, Cengage Learning SLIDE 10
Chapter 8
Evan Anderson—Budget for September
Income Expenses
Part-time job $320 Daily lunches $ 80
Allowance 20 Supplies 20
Birthday gift 40 Clothes 40
Total Income $380 Entertainment 140
Total expenses $280
Savings
Credit union account $100
Total expenses plus savings
$380
Simple Budget
The budget balances.
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Chapter 8
Anisa Newkirk
January 1, 20—
Assets Liabilities
Checking account $500 Loan on car $1,800
Savings account 800 Loan from parents 100
Car value 3,000 Total liabilities $1,900
Personal property 5,000 Net Worth
Total assets $9,300 Assets minus liabilities $7,400
Total liabilities and net worth $9,300
Net Worth Statement
These two numbers must be the same.
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Chapter 8
Personal Records Good personal records makes budgeting and long-
range planning easier.
Your records also make it easier to prepare income tax returns, credit applications, and other financial forms.
You should keep five types of personal records: Income and expenses records Net worth statement Personal property inventory Tax records Other miscellaneous documents
© 2010 South-Western, Cengage Learning SLIDE 13
Chapter 8
Income and Expenses Records Examples of income records
W-2 forms Statements from banksStatements from investment companies
Examples of income records Receipts listing charitable contributionsMedical billsReceipts for work-related expenses
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Chapter 8
Net Worth Statement A net worth statement shows a person’s net worth
based on his or her assets and liabilities.
Assets are items of value that a person owns.
Money or debts you owe to others are called liabilities.
When you subtract your liabilities from your assets, the difference is known as net worth.
Assets – Liabilities = Net worth
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Chapter 8
Personal Property Inventory A personal property inventory is a list of the valuable
items you own, along with their purchase prices and approximate current values. Vehicle Camper/Boat Bike Clothing Furniture Appliances Lawnmower Tools Keepsakes
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Chapter 8
Personal Property InventoryAnisa Newkirk: January 2, 20—
ItemYear
PurchasedPurchase
PriceApproximate Current Value
Sphinx XTL DVD Player with big-screen TV 2008 $ 3,200 $1,300
Bedroom furniture (bed, dresser, lamp, clock) 2006 2,000 1,200
Clothing, jewelry ------ 3,000 500
MBD motor bike 2005 1,800 1,000
CD collection, CD burner, digital camera, scanner 2006 2,000 1,000
$12,000 $5,000
(continued)
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Chapter 8
Tax Records All taxpayers should keep copies of their tax records
for at least three years after they file their tax return.
Tax records Tax Return itself W-2 forms Any receipts verifying income and expenses that was listed on
the tax return.
NOTE - Keep your tax records in a safe place in case of an audit.
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Chapter 8
Other Miscellaneous Documents
Lists of credit card numbersCar titlesInsurance policiesBirth certificatesMarriage certificatesPassports
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Chapter 8
Personal Record Keeping
As you begin to accumulate financial records and legal documents, you should have a good filing system.
A filing system allows you to:OrganizeStoreRetrieve
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Chapter 8
Paper Filing System
FoldersLabelsFile cabinet
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Chapter 8
Electronic Record Keeping
The advantages of computerized systems include the following:
Ease of updating informationEase of record storage and retrievalSpeed of making new computations and
comparisons
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Chapter 8
Software ProgramsMany software programs can help you
keep better records.
A spreadsheet is a computer program that organizes data in columns and rows and can perform calculations using the data.
A database is a computer program that organizes data for easy search and retrieval.