3. Learning Objectives
In this session, we will set you on a path to:
Identify/Develop your financial goals
Examine how financial values come into play
Discuss basic budgeting terminology and principles
Explore tools to develop your personal budget
Talk about challenges and barriers to budgeting
Discuss ways for you to track your financial health and
progress
4. Trigger Warning
Money Management can stir up “stuff” within us:
Anger
Guilt
Frustration
Sense of Hopelessness
Anxiety/Fear
Avoidance
5. Why Budget?
Budgets are a necessity to take control of personal
spending, saving, and debt.
The loudest voices in finance come from corporations
that do not have your best interest in mind.
Living beyond your means is a dangerous practice.
Many individuals don’t realize they are overspending
until they are deeply in debt.
Credit cards and easy access to funds make it easier to
be mindless about spending.
The absence of a budget is one of the greatest
contributors to stress about money matters.
6. Health and $$
A 2013 study by Northwestern’s Feinberg School of
Medicine showed that young adults (24-32 years old) in
debt had higher blood pressure levels and exhibited
more depressive symptoms than their debt-free
counterparts.
The same study showed the higher the debt-to-asset
ratio, the higher perceived stress and depression and
worse self-reported general health.
(Sweet, McDade, Adam & Nandi, 2003)
7. Start From Scratch
Whether you have a budget that is giving you challenges
or have never created one – let’s wipe the slate clean!
Have a healthy dose of skepticism toward information
available on finances; choose websites, books, and
magazines wisely
Empower yourself to become an expert on your personal
finances. (No ostriches allowed!)
8.
9. Financial Decision-Making
Whether we are conscious of it or not, our values
determine how we use our money.
Any financial goals you create are an extension of your
values.
Financial hardship often comes when we stop paying
attention to the connection between our values and our
money.
Take a moment and write down 5 of the values that you
hold to be central to your identity.
10. Where to Begin?
Your Financial Snapshot: The Net Worth Statement
Your personal net worth is the difference between all of
your assets (things you own) and liabilities (debts you
owe).
Your net worth statement is a complete list of all of
these items and their current values.
Having concrete knowledge (not a “guesstimate”) of
your net worth allows for the best starting point for the
budgeting process.
12. Assets
Real Estate
House
Land
Rental Property
Personal
Property
Vehicles
Campers/RVs/Boats
Household
Goods
Furnishings
Jewelry/Furs
Electronics
Money Owed to
You
Rental Deposits/Utility Deposits
Other Assets
Life Insurance (only with cash
value not term policies)
13. Liabilities
Loans
Mortgages
Home Equity Loans
Vehicle Loans
401(k) Loans
Student Loans
Credit Card Balances
Taxes Owed
Real Estate Taxes
Unpaid Income Taxes
Quarterly Estimated
Taxes
Other Debts
Unpaid Bills Due
Alimony
Child Support
Miscellaneous
14. Creating a Net Worth
Statement
Start by listing everything that you own, even if you still
owe money on them, such as house, car, etc. ( ALL
ASSETS)
List all items at their current market value today.
Add up all assets and subtract cumulative liabilities.
If number is positive, CONGRATS! You have a positive
net worth. Your goals will be focused on building
wealth.
If the number is negative, DO NOT DESPAIR. Your
journey beginnings with working toward a positive net
worth.
15. Why Financial Goals are
Important
“Goals are like the wheels on your car; they keep you
moving in the direction you want to go, and you won’t
get very far without them.” – Davidoff
Working toward goals brings a sense of accomplishment
and diminishes stress.
Financial Stewardship is a theological value.
16. Name Your Short-Term
Financial Goals
Determine what your goals are for the near future
start small, for example, for the academic year.
Samples:
Not accrue more than $$ in student debt this year
Pay off my car
Save up an emergency fund for unexpected life events
Pick 2-3 and write these goals down…….seriously, do it!
Display them in a location where you will be reminded
of them often.
17. Developing Your Budget
Once you have your net worth statement and have
created some financial goals, you are ready to create
your budget.
Your Budget = your tool for attaining your goals
The term “budget” can bring negative imagery to mind
(penny-pinching, stress, etc.). Choose your ‘tude!
A budget is a spending plan. Nothing more.
Controlling spending makes saving effortless.
18. Signs of a Good Budget
It should be Realistic
Has some flexibility to meet the changing demands of
life
Allows progress toward your goals
Should be simple enough that you can manage it in the
time you allot
Should reflect the your financial values
19. Customizing Your Budget
List and add all your sources of income for one month
(MONEY IN):
Wages from job/s
Student Loans (a monthly total)
Child support/alimony
Rental income
Interest income/Dividend income
Child support and/or Alimony Income
Other sources of income (family support?)
20. Customizing Your Budget
Next, list all of your expenses for one month (MONEY OUT):
Savings (list me first)
Mortgage or Rent
Utilities
Auto Expense/Other Transportation
Tuition
Groceries/Eating Out
Insurance (auto, medical, home)
Medical Expenses (out-of-pocket)
Entertainment/Recreation
School Supplies (Computer, Books, etc)
Child Care
Credit Card Payments
Clothing/Shoes
Gifts and Donations (Tithes)
Household/Personal Care Products
Miscellaneous
21. Pete the Planner
The following are recommended guidelines for the most common
financial categories in budgets:
Rent/Mortgage – 25%
Utilities/Phone – 10%
Transportation – 15%
Groceries/Dining Out – 12%
Savings – 10%
Entertainment – 5%
Medical 5%
Gifts/Donations – 10%
Clothing/Shoes – 5%
Misc. – 3%
These are guidelines, not universal laws, but try not to stray too far
from these figures.
22. Setting Your Budget
Figures
Set a realistic spending goal for each category
First, figure out where you money is going now – how
much to each category and use that as a guide
Track the small expenditures – trips to Starbucks, iTunes
downloads, snacks from across 21st Ave.
23. Keep it Simple-Go Digital!
Mint.com – use it!! (Basic edition is free)
Links to all bank accounts, mortgage, credit cards, and
more…
Creates a net worth statement
Notifies you of upcoming bills and recent transactions
Allows you to enter receipts immediately via the phone
app
Helps you set a budget and gives real-time updates on
where you are with regards to your goals
Displays everything in pretty and easy to understand
charts and graphs
24. Monitor Progress
Monitor your progress each month
Celebrate each victory
Plug any “spending leaks”
Impulse buys
Grocery indulgences
Over-purchasing (phone plans, cable TV, anything that you
are paying for and don’t really use/need)
25. Top 10 Personal Finance
Tips
From “The Everything Personal Finance in Your 20s and
30s Book,” by Howard Davidoff, JD, CPA, LLM”
1. Make the effort to educate yourself about personal
finance. Read financial magazines and good financial
books and use well-known, reputable sites on the
Internet.
2. Budget! Operating without a budget is like driving a car
without a steering wheel. You don’t have control over
where you are headed.
3. Save the pennies and dollars will save themselves. Lots
of small amounts add up to big savings.
26. Top 10 Personal Finance
Tips
4. Pay cash. If you can’t afford to pay cash, maybe you
can’t afford to buy.
5. Always think about opportunity costs. You may not be
paying for something directly, but giving up the
opportunity to make money is a real cost.
6. If possible, take savings out of your paycheck before you
see it. After a while you will get used to spending on
the lower amount, while your savings grow.
7. Be a smart shopper. Don’t buy cheap items that won’t
last and don’t pay for bells and whistles that you don’t
need or won’t use.
27. Top 10 Personal Finance
Tips
8. Know how to recognize the warning signs of too much
debt, and if you see yourself headed for trouble, act
quickly, before you ruin your credit score.
9. Don’t go without some type of medical insurance, even
if you can only afford a policy with a very high
deductible. If you become ill or are injured in an
accident, the medical bills could ruin you financially.
10. Remember, most millionaires are just average people
who practiced sound financial principles like those in
this book. You could be one of them.