Money Management

What is money management?
Knowing how to save, spend and invest your money so that you and your family can successfully work toward your financial goals

What activities go with money management?

• Tracking your spending.
• Making a budget.
• Balancing your checkbook.
• Using credit wisely.
• Setting long- and short-term goals.
• Earmarking money for savings.

Wise money management can help you

• Pay your bills on time.
• Make it through times when you are not working.
• Save money.
• Plan for short- and long-term goals.

Step to manage your money

Step 1: Assess Needs

Make a realistic list of needs and wants
Needs                                                  Wants
Food                                                    Lots of Money
Clothing                                              Cell Phone
Housing                                               VCR or Big TV
Transportation                                     New Car
Child Care                                           Designer Jeans
Insurance                                             Vacations
Medicines                                            Boat
Titan Tickets

Step 2: Set Goals

Make sure your goals are SMART…
Specific- Clearly state what you want to do
Measurable- Measure by time and/or money needed
Attainable- Make sure your goal is realistic and possible
Relevant- Make sure goals fit your needs
Time related- Set a definite target day (day/month/ year)

Step 3: Make a Plan

Put things in Priority Order- Imagine the actions you need to take to get from where you are now to where you want to be.
Goals are dreams with deadlines! Post your goals where you will see them frequently. Find a picture to represent your goals. Make them happen.

SMART GOAL

Goal: Use cash to purchase a refrigerator in 6 months.  New refrigerator will cost $600.00. 
Must save from each paycheck:
            $100/Paycheck  -  if paid monthly
            $50/Paycheck  - if paid bi-weekly or semi-monthly
            $25/Paycheck -  if paid weekly
Your Plan with Actions
I will save $25.00 from each weekly paycheck for refrigerator.
 Steps to Get There:

• Pack lunches.
• Borrow movies and CD’s from the library.
• Shop with a list for everything.

Stay out of Walmart!
Prioritizing goals

1. Build an emergency savings of $_____________.
1. Put $50.00 from each paycheck for 5 months.
2. Use OVERTIME or BONUS $$ to build more quickly.
2. Build a retirement account.

Put $50.00 (automatic deduction)
401(k)
Roth IRA

Money Management

• The money that comes in   - INCOME
• Regular take home income
• The money that goes out – SPENDING
• Must know what you are spending to develop a plan for managing your money.
• Three type of expenses

How much money comes in each month?
Income has two parts:

• Gross income- total you actually earn
• Net income (take home pay) - what is left over after your employer takes out deductions for taxes, Social Security, Medicare, and other needs.

Three Types of Expenses

• Fixed expenses

• Car Payments
• Rent or Mortgage
• Child Care
• Cable TV
• Car Insurance

• Flexible (variable or controllable) expenses

• Clothing
• Food

                        at home
                        away from home

• Telephone
• Utilities
• Gasoline
• Public Transportation
• Medical / Dental
• Recreation
• Supplies

                     household
                     personal

• Periodic or occasional expenses

• Car Maintenance / Repairs
• License Tags
• Insurance Payments
• Gifts / Holidays
• School
• Taxes
• Magazine Subscriptions
• Vacations

Tracking your money

Keep and organize the following items to help you keep up with expenses

• Check registers
• Check stubs and canceled checks
• Receipts
• Bills and invoices
• Credit card statements
• Calendars, diaries, pocket notebooks

Trimming Expenses

• Pack lunch for work or school
• Shop for store or generic brands
• Use the public library
• Choose free recreational activities
• Check resale shops or garage sales for bargains
• Eat out less often
• Handle home maintenance and repairs yourself
• Use public transportation when possible
• Take advantage of free activities

SAVINGS

It’s never impossible to save money, no matter how small the amount.
Saving Your Money

Two types of savings accounts…
1) Emergency fund – provides means for paying for emergencies instead of using credit
2) Nest egg account- helps you reach specific goals such as buying a house or taking a vacation

Start the Savings Habit Now!

• If you save $20 per week, every week for a year, after one year you will have saved $1,040!
• Keep this up and after five years you will save $5,200, not to mention the interest you will earn!

Remember these tips…

• Don’t shop on payday
• Don’t shop when you’re tired
• Don’t shop for food when you’re hungry
• Take your time. Try not to shop when you have to hurry
• You don’t have to buy it today
• Remember, nothing is a bargain unless you need it
• Have a spending plan and stick to it
• No one can make you buy anything

How much debt is too much?

Rule of thumb for consumer debt
Under 15%=comfortable        15-20%=Caution
Over 20%=Danger!!!
To figure your debt-to-income ratio:
Total average monthly debt payments
(excluding mortgage/rent and utilities)  $400
Monthly take-home pay                                  $2,000
$400  ÷ $2,000 = .20 = 20%

Managing your Money

Developing a Personal Spending Plan will show you…

• What money is coming in
• How much you spend on the basic needs, fixed and variable
• How much you need to set aside for periodic or unexpected expenses
• How to plan for savings and investing
• What is left over for your wants