Budgets

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Budgets

• Ms. Alexander
• Financial Decision Making

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Budgets

• Present decisions about jobs, career, education,
  training, and entrepreneurship will all affect
  future income and wealth.

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Budgets

• Budget
• A budget is both a spending plan and a list of
  spendable funds

• Deficit
• Insufficient revenues relative to outlays. The
  opposite of surplus

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Budgets

• Needs
• Goods and services that an individual must have
  to survive (food-water-shelter)

• Discretionary spending
• Implies the buyer has a choice (purchase the item
  or delay purchase)

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Budgets

• Nondiscretionary spending
• Is for expenses over which one does not have
  control (taxes-insurance)

• Opportunity cost
• The cost of passing up the next best alternative
  when making a decision

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Budgets

• Scarcity
• The basic economic situation --- limited
  resources and unlimited wants a lack or
  inadequacy

• Occasional or periodic expense
• Expenditure of money that occurs from time to
  time-not on a regular basis

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Budgets

• Surplus
• The amount by which revenue () exceeds
  expenditure (expense)

• Wants
• Goods and services that an individual would like
  to have

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Budgets

• Wants
• Goods and services that an individual would like
  to obtain e.g. an upgraded computer, a sports
  car, dance training

• Human capital investment
• The investment in a persons education, training,
  or skills development.

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Budgets

• Fixed expense
• Expenses that do not generally change from month
  to month (rent-car payment-health insurance-union
  dues)

• Variable expense
• Expenses that vary from month to month (utility
  bills-food)

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Budgets

• Periodic expense
• Expenses that occur occasionally (computer
  repairs-vet bills)

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Moving Out
Janets Info She is 18 and a recent high school
graduate She has a full-time job as a
receptionist and makes 10.50 an hour. Her
monthly net income is approximately1,400 Her
parents charge her 175 a month for a room and
food while she is living at home and working She
walks to work or uses public transportation. She
has no plans to buy a car When her six-month goal
of moving out was stated she did not have any
savings
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Budgets

• Goals
• In terms of personal finances, any future plans
  or objectives that require specific financing,
  such as purchasing a house or paying college
  tuition

• Investment
• Property or another possession acquired for
  future financial return or benefit also a
  commitment of time (e.g., to education or training

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Budgets

• A budget is a plan for how income will be spent
  and saved

• Goals and values influence financial decisions

• Financial responsibility means that individuals
  are accountable for their own financial future

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Budgets

• A decision making process helps people make
  informed choices on how income is saved and spent

• Budgeting (saving and spending decisions) has
  costs and benefits

• Setting financial goals is a first step in
  managing money wisely

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Budgets

• Goal setting is a way to identify what a person
  wants to accomplish and within what time frame.

• A time frame to use for goal setting can be
  categorized as short-term, long-term or
  intermediate.

• A personal financial plan is an important
  component of money management.