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Budgeting is about choice not about chance.

2/19/2013 9:40:00 AM

Text Definition- Budget A paper/electronic document used to record both planned and actual income and expenditures over a period of time. Mental? Yes What words may be more acceptable than the word budget? Plan, strategy, spending/saving plan Without a plan, its probably a dream! Its a positive endeavor and not a straight jacket Why have a plan? Obtain maximum satisfaction Feel as though you can actually do it Having a way to meet goals PRIMARY PURPOSE: achieve success in financial goals!! Financial Goal Setting What stage does your text call this? Action before Set goals: o What do I/we/clients want from their money? Based on ones values Have short and long term goals- how are these defined? Set narrow specific goals rather than broad generalized goals o What is wanted o $s required (estimated cost) o target date for accomplishing (completion date) o excellent examples page 84 All members are involved or committed May find list of goals to be larger than resources o Prioritize If balanced on high-interest credit cards Students buying new car after getting first job to celebrate making it.

Major Concept To achieve your long-term goals one may have to sacrifice by deferring some of your short-term desires. See text p. 84 Make and reconcile budget estimates What stage does your text call this? Estimate income o Help can come from looking at which financial statement? Gross income o All sources Disposable income-also called? Take home o After taxes and other employee withholdings Discretionary income o After necessities are met What if uncertain about the amount of income? o Go with the lower amount! What if expenses exceed income? o 3 choices increase income Estimate Expenditures Help can come from looking at which financial statement? income o Fixed Easier Larger- tuition, auto ins., etc. (use revolving savings account) o Variable More difficult o Know how you are defining categories o Include a savings category Pay yourself first! One of the best ways to do? Problem with not paying self first as a fixed classification

How much?! Rule of thumb at least 5%

Select record keeping format Commercial ledgers Self-prepared ledgers Computer o Excel, quicken, Microsoft money Control Spending What stage is this? Occurs simultaneously with implementing o Act according to plan Record What about small expenses? o They add up quickly!

Evaluate Budgeting Process What stage is this? o Action-afterwards Feedback Extremely important to compare estimated and actual o This is called variance analysis or reconciliation o Not likely to be exact Decide what to do with balances o Surplus o Deficits Short term Repeatedly

Was progress made toward obtaining goals??! Asked to make presentations? THURSDAY 2/28 100 MC QUESTIONS

2/19/2013 9:40:00 AM

2/19/2013 9:40:00 AM