Income Management

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Income Management

• Chapter 12

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Before We Begin

1. Where do you get your money?
2. What do you spend it on?
3. Where do your parents get their money?
4. What do they spend it on?
5. Where do your grandparents get their money?
6. What do they spend it on?

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Chapter 12 Income Management What Is Money?

• Money allows businesses to operate and consumers
  to buy products and services that meet their
  needs and wants.
• Forms of Legal Tender
• Coins and paper money are classified as legal
  tender by the government of Canada and must be
  accepted as payment for goods and services. Coins
  are minted and
• bank notes are issued as paper money.

• Canadian Bank Notes
• Since 2001, the Bank of Canada has been updating
  bank notes with sophisticated security features.
  Canadas culture, the queen and prime ministers
  are depicted on bank notes.

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Chapter 12 Income Management What Is Money?

• Special Features of Bank Notes
• Ever changing state-of-the-art security features
  on Canadian bank notes discourage high-tech
  counterfeiting (the production of fake money).
• However, features such as unique textures on
  every note help visually impaired people to make
  distinctions between denominations.
• Credit cards, traveler's cheques, passports, and
  other identification are subject to
  counterfeiting as well.

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Chapter 12 Income Mgmt What Is Money?

• Bank of Canada Information p.366 textbook and
  BofC booklet card
• Note the various security features that are found
  on this 20 bill.
• 1. Holographic stripe When you tilt the note,
  brightly coloured number 20s and maple leaves
  move within the shiny stripe on the side of the
  bill.
• 2. Watermark portrait Hold the bill to the
  light. On the front and back,
• ghost-like images of the portrait appear.
• 3. See-through numbers Irregular marks form a
  number 5 when the bill is held to the light.
• 4. Security thread When you hold the note to the
  light, a solid
• line appears.

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Chapter 12 Income Mgmt What Is Money?

• New Bank of Canada Polymer Bank Notes
• Videos
• Security Features
• Design and Development
• How its Made
• Distribution
• Security Feature Video

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Chapter 12 Income Mgmt What Is Money?

• New Bank of Canada Polymer Bank Notes
• 100 bill issued on November 14, 2011.
• 50 bill issued on March 26, 2012
• 20 bill issued on Nov 7, 2012
• 5 and 10 will be issued in November 2013

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Chapter 12 Income Management What Is Money?

• Moneys true value is its purchasing power. The
  paper used to
• print our currency is virtually worthless.
• Money is worth something only because we accept
  that it has a specific valuetwo nickels equal
  10, four quarters equal 1, etc.
• Moneys purchasing power changes as prices for
  goods and services change.
• In general, prices tend to rise (inflation), so
  the dollar buys less from one year to the next.
  Today, 10 buys much less than it did 30 years
  ago.

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Chapter 12 Income Management What Is Money?

• You have probably noticed that the prices of
  clothing, magazines, and movie tickets have
  increased over the past few years.
• Purchasing power is measured by the Consumer
  Price Index (CPI), which is calculated monthly by
  Statistics Canada.
• It measures 600 products typically bought by
  Canadian households.
• This basket of goods includes food, shelter,
  transportation, clothing, recreation.

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Chapter 12 Income Management What Is Income?

• Income is money that an individual or business
  receives from sources, such as wages or sales,
  interest, and dividends. Closely related to
  income is the need for a financial plan that
  looks at how to make money grow.
• Types of Personal Income
• 1. Forms of Employment Income
• 2. Employees Benefits
• 3. Other sources of income
• can include dividends, allowance, interest,
  gifts,
• part-time jobs, and inheritance.

• salary
• wages
• commission

• piecework
• profit sharing

• medical insurance
• paid sick days

• paid holidays
• drug and dental plans

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Chapter 12 Income Management What Is Income?

• 4. Gross Income
• Gross income is the total amount of money
• received by a person before any deductions.
• 5. Disposable Income
• Disposable income, or take-home-pay, is the
  amount of income that is left after deductions of
  income tax, Canada Pension Plan (CPP), and
  Employment Insurance (EI).
• 6. Discretionary Income
• Discretionary income is the amount of money that
  is left over after all necessities have been
  paid. Necessities consist of rent or mortgage,
  food, transportation, insurance, electricity, and
  so on.

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Chapter 12 Income Management Managing Money
for Personal Use

• Money management is the daily financial
  activities aimed at satisfying a persons needs
  and wants within a limited income. Individuals
  need to carefully plan, save, and spend their
  money to get the most out of it.
• Why We Buy? (p.371-373)
• Income and Price
• Status
• Current Trends
• Customs and Habits
• Promotions

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Chapter 12 Income Management Spending Money

• Todays society is known as a consumer-driven
  one. This means that the economy offers
  consumers a never ending supply of exciting and
  innovative goods and services.
• Comparison Shopping
• Comparing price, quality, features, and services
  helps consumers make smart purchases.
• Comparing Price and Quality
• Comparison shopping means selecting the least
  expensive product or service that best meets the
  consumers needs and wants.
• Features
• The features of goods and services are often the
  most important requirements for consumers when
  they purchase these items.

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Chapter 12 Income Management Spending Money

• Services
• Retail stores often offer services that
  complement their merchandise. Some of these are
  free delivery for large purchases or warranties
  on these items. Warranties are usually written
  promises that products comply to high standards.
• Planning and Comparing
• Prices and features of products or services can
  be compared using catalogues, newspapers, calling
  stores, or Internet searches.

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Chapter 12 Income Management Budgeting

• A budget is a plan for smart spending and savings
  based on ones income and expenses.
• Personal Budgeting
• Personal budgets can be kept daily, weekly, and
  even monthly.
• Many people avoid budgeting because they believe
  that it is too difficult, or it will limit their
  enjoyment of life.
• However, learning to budget can actually help
  them find money for the things they really want
  or need.

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Chapter 12 Income Management Budgeting

• Personal Budgeting continued
• Setting Personal Goals
• Setting up a personal financial plan requires
  establishing realistic and achievable short- and
  long-term goals.
• Most people need to set aside specific minimum
  monthly amounts to achieve long-term financial
  goals.
• For example Saving for post-secondary, a car, a
  vacation, a down-payment for a house

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Chapter 12 Income Management Budgeting

• Preparing a Personal Budget

Step 1 Calculate the amount of expected income.
Step 2 Calculate expenses.

• Include regularly occurring fixed expenses.

• Estimate variable expenses that change monthly.

Step 3 Calculate amount left over.
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Chapter 12 Income Management Managing Money
for Business Use

• Money management for businesses means that they
  are accountable to the owners and/or
  shareholders. The primary goal is profit.
• Types of Business Income
• Three forms of business income are revenue, gross
  income, and net income.
• Budgeting for a Business
• Business success is determined by its ability to
  stay within a budget.
• The two types of business budgets are start-up
  budgets and operating budgets.
• Setting Business Goals
• Managers set company goals that are measurable
  and specific. Budgets often involve a variety of
  different departments, such as production,
  marketing, human resources, and finance.

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Chapter 12 Income Management Managing Money
for Business Use

• Preparing a Business Budget

Step 1 Calculate amount of business income
expected.
Step 2 Calculate expenses, including fixed and
variable.
Step 3 Calculate amount left.
Step 4 Review budget.
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