UK 101

Money Management

Overview

What is a Budget SMART Goals Income Received Expenses spent Sticking to Your Budget

Saving $$$$ Tips

Common Money Mistakes

Credit Revolving credit Credit History Advantages/Disadvantages

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SPENDING DIARY

Activity

Elements of a Budget

What is a Budget?

A budget is a financial record of how much money you earn and how much money you spend on items.

A tool you can use to track your expenses and income.

To create a budget, complete these 4 steps: Set goals for yourself Know how much

income you receive each month

Know how much money you spend each month

Stick to your budget.

Goal Setting

Goals give you direction and a purpose for working toward things that are important to YOU!

To help identify your goals, ask yourself the following questions: What do I want to do with my money? How much will it cost? How long will it take to get that much money?

SMART Goals

Specific: who will be involved, what is the goal, and why do you want to achieve this goal?

Measurable: so you know if you have made progress or reached the end point

Attainable: Don’t set yourself up for failure. Set a goal that you think you can accomplish.

Relevant: It has to have meaning for you. If you don’t want to reach the goal you will not be motivated to take the steps needed to accomplish

Timed: Timing or season may influence how motivated you are or your ability to accomplish the goal.

Income: How Much Do You Make?

Look at your pay stub and your amount of gross pay: Gross pay is the amount of money you earn before

deductions.

 Next determine what your take home (net) pay is.

Take home pay is calculated by subtracting deductions from your gross pay.

Deductions could be your: Dental insurance Medical insurance Life insurance Retirement deductions Social security taxes Medicare taxes

Income Continued

Finally you need to include any other money you may receive such as: Tips Commission Rent Interest Dividends

Add your take home pay and any other money you receive and you will have a realistic picture of how much money you earn.

Expenses: How Much Do You Spend?

The best way to keep track of your expenses is to write down EVERYTHING you buy, even if something is just 50 cents or a dollar.

Group your expenses into categories such as food, clothing, gifts, insurance, etc. This will give you a clearer picture of where you money is going each month.

Sticking to Your Budget

To give you an idea of how much money you spend and make, record your income and expenses for an entire month. This will give you a base from which you can estimate your monthly expenses.

From this base, plan out what you will spend the following month. Estimate any major expenses, emergencies, seasonal expenses, debts and items such as rent/mortgage and other monthly bills. In doing so, you have created a budget for yourself.

Questions to Ask Yourself…

If you feel yourself wanting to give in and straying away from your budget ask yourself 3 questions: Will this purchase help me reach my

financial goals? Is this purchase listed on my budget? What will I have to give up if I spend my

money on this purchase?

Saving Money

Importance of Saving Money

It can be difficult to save when money is tight but anything you can save will help you in the future.

You may want to include saving as a line item in your budget.

Saving Tips

Common Money Mistakes

Common Money Mistakes

Not saving enough money. Ask yourself what you would do if your car broke down or you lost your part-time job?

Living on the financial edge. Many people have to borrow money when a financial crisis occurs. Motivate yourself to spend less and save the difference for emergencies and future financial goals. When you have a goal, spending less doesn’t seem like

deprivation but more like moving toward your goal—and that is very satisfying.

Common Money Mistakes Continued

Spending on impulse. Before you buy something, ask yourself if you really need the item or can get along with something that you already own or could borrow, rent, or buy used. For costlier items, do

research and compare at least three vendors to make sure you’re getting the best value.

Credit Cards

Credit: What is it?

Credit is a service that lets you buy now and pay later.

You use someone else’s money to buy something you want to use now.

Credit means using your money from future paychecks to pay for something you buy now.

Credit & Revolving Credit

Credit cards are a form of revolving credit.

Revolving charge accounts allow you to borrow at any time, in any amount up to a maximum credit limit.

How Much Does Credit Cost?

When you buy on credit, you use someone else’s money so you can buy something now.

The price you pay of using the money is called interest.

Interest varies from creditor to creditor, so shop around, and ask the following questions: What is the annual percentage rate? How long do you have to pay off the loan? What is the cost of late charges for overdue payments? If you pay the loan off early, are there any pre-

payment penalties?

Credit History

Your credit history shows your ability and willingness to repay a debt.

It is measured by your record of paying bills.

It is determined by how prompt and reliable you have been in making past credit payments.

A good credit history helps you qualify for credit and helps you get credit at a lower cost.

How Long You Take to Repay

The longer you take to repay your debt, the more you will pay.

Take the shortest amount of time to repay a debt and make the highest monthly payment you can safely afford.

Should You Use Credit?

Before buying an item on credit, ask yourself if you can justify using credit rather than waiting to buy the item when you have the cash. Is this something I

really need? Is this something I

planned in my budget? Can I make payments?

Advantages Disadvantages

Credit allows you to use an item while you are paying for it.

If you carry credit cards, you can carry less cash.

With credit, you can buy more than you can afford.

If you don’t understand the credit contract, you may agree to something you don’t really intend to.

Overuse and abuse of credit can lead to a poor credit rating.

The use of credit ties up money out of paychecks in the coming months.

Advantages & Disadvantages of Credit

Reducing the Cost of Credit

You can reduce the cost you pay for credit if you: Make as large a down payment as possible. Shop around for the lowest annual

percentage rate Arrange the highest monthly payment you

can afford Pay your bills on time, which protects your

credit rating Only use credit when you really need it

BEAN GAME

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