Chapter 8

Budgets and Financial Records

Financial PlanningDisposable income –

.

Financial plan –

All $$ you receive is _____, ______, or __________.

Reasons for Financial Planning

Determine and evaluate options for using $Make sure you use your limited funds for the things you most want.Prevent careless and wasteful spending.Organize your financial resources.Avoid money worries.

Preparing a BudgetBudget –

Money coming in (earnings plus borrowing) must equal money going out (spending plus savings).

A budget should ___________Total income =

Steps to Prepare a Budget

1. -

2. -

3. -

4. -

Typical Monthly BudgetExample budget on page 210

Estimate income including wages, interest, and investment earnings

Fixed expenses –

Ex:

Typical Monthly Budget

Variable expenses –

Ex:

Personal Records-

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Record of Income and Expenses

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Statement of Net WorthAssets – Liabilities = Net Worth

Assets –

Liabilities –

If Assets > Liabilities =

If Assets < Liabilities =

Personal Property Inventory

List of all valuable items you ownInclude purchase price, and approx. valueEx: Clothing, furniture, appliances, electronicsUseful in the event of fire, theft, property damage.Also can take pictures or video.

Tax RecordsKeep all tax returns, W-2 forms, and other receipts used for tax purposes.

Keep returns for at least __________.

Could be used in the event of an ____ _______.

Can be audited up to 3 years after filing return.

Legal Documents and Filing Systems

Contract –

Ex: credit plans, mortgages, rental agreements.

Types of Agreements

Express Agreements –

Implied Agreements -

Required Elements of an Enforceable Contract

1. -

2. -

3. -

4. -

5. -

6. -

ElementsAGREEMENTMutual Assent –

2 conditions – Valid offer (intention) and acceptance of exact offer

Counteroffer -

Elements cont.CONSIDERATION –

Object of value, money, a promise, a performed service.

Each party must receive something of value and/or give something up.

Elements cont.CONTRACTUAL CAPCITYCompetent parties –

Cannot have a mental deficiency or illnessMay not be a minor (limited contractual

capacity)

Elements cont.LEGALITY –

LEGAL FORM –

Elements continuedGENUINE ASSENT – cannot contain any of the following:Fraud -MistakeDuress -Undue Influence -

4 Elements of Fraud

1)

2)

3)

4)

Classification of Contracts

Valid -

Void -

Voidable -

Consumer ResponsibilitiesUnderstand all clauses and termsKeep a copy of agreementBe sure agreement is dated correctlyBe sure all blank spaces are filled inBe sure all terms are written clearlyBe sure all numbers are correctBe sure proper disclosure is made by the sellerBe sure all adjustments are made in accordance with terms of the contract

Negotiable Instruments

Negotiable instruments –

Ex:

Cosigner -

Negotiable Instruments

Legally collectable if:

1)

2)

3)

4)

5)

WarrantiesWarranty –

All products contain implied warranties–

Specific warranties often guarantee that a product will perform for a certain period of time.

Personal Record Keeping

Paper Filing System – filing cabinet w/ labeled folders

Electronic Record Keeping Spreadsheet -

Ex:Database -

Ex: