Act Your Wage. Learning to budget based on your income , Take Charge America

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1 Act Your Wage Learning to budget based on your income. 2015, Take Charge America

2 What is a Budget? A plan for spending your money. Understanding: what s coming in what s going out where it s going

3 The Do s and Don ts of Budgeting Do identify where you are spending your money Do set goals for your spending Do write it down Do make a list of your expenses Don't think of a budget as a punishment Don t make your budget too rigid

4 Are You Budgeting? If you are not saving, you are not budgeting! 40% of Americans live on 110% of their income. 70% of people who get instant wealth lose it in about 4 years.

5 Three Elements of a Budget Income Fixed Expenses Variable Expenses

6 Regular or Anticipated Income Regular take-home pay; after deductions Pension Social Security Veteran s benefits, worker s compensation, welfare, etc. Interest on loans or savings accounts Alimony Child support

7 Fixed Expenses Any expense that stays the same month to month. What you know you must spend each month: Rent/Mortgage Car Payment Insurance

8 Variable Expenses A cost that changes over time, depending on how much you use. Utilities Groceries Gas for vehicle

9 Needs vs. Wants Need: something that is important or required Food, water, shelter, clothing Want: something you desire but can live without Designer clothes, luxury vehicle, vacation, new cell phone Our WANTS are what get us into trouble!

10 Meet the Flays Allen and Gina Flay have been married 7 years. Their daughter Kimberly is 5 years old. They enjoy taking Kimberly places & creating memories. They recently purchased a new puppy that Kimberly named Dimples.

11 Time for the Flays to Act Their Wage As of this month, Allen is currently the only income earner. Gina has decided to go back to school full time to pursue a college degree. What they could afford in the past, they may not be able to afford while Gina is in school. We are going to budget according to their income.

12 Locate the letter at the top of your paper: A, B or C A What is your income: Section 1 Section 2 Purchases Cost Pay Pass Cost $ SAVINGS $170 X $ Shelter $800 X $ Utility Bills $235 X $ Medical Prescription $25 X $ Doctors Co-pay $20 X $ Groceries $305 X $ Total $ 1, You have $ left to spend 6 Cell Phone $150 7 Friday Night Movie $30 8 Trip to Zoo $60 9 Family Picnic in the Park FREE 10 Birthday Gift $25

13 The Flay s Wage Based on the letter, enter the appropriate income for the Flays on the top line on the budget form. A B C

14 Pay Yourself First! What the Flays should save has been entered for you on the first line in Section 1. A What is your income: Section 1 Section 2 Purchases Cost Pay Pass Cost $ SAVINGS $170 X $ Shelter $800 X $ Utility Bills $235 X $ Medical Prescription $25 X $ Doctors Co-pay $20 X $ Groceries $305 X $ Total $ 1, You have $ left to spend 6 Cell Phone $150 7 Friday Night Movie $30 8 Trip to Zoo $60 9 Family Picnic in the Park FREE 10 Birthday Gift $25

15 Determine NEEDS vs. WANTS Needs Shelter Utility Bills Prescriptions Doctors Co-Pay Groceries If they own a vehicle Vehicle Oil Change Insurance Vehicle Brakes Gas

16 Let s Discuss! What expenses did you budget for and why?

17 Is There Enough Money? When the budget doesn t balance what are the alternatives in order to save money?

18 Alternative #1 Cable & Internet Netflix & Internet Bundle of Cable Service and Internet = $ per month Internet Service - $41.99 Netflix Streaming Services - $7.99 Total = $49.98 per month Savings = $80.00 per month

19 Alternative #2 Eating Lunch Out McDonalds $6.48 Subway $5.78 Pizza Hut $7.84 Burger King $5.28 Paradise Bakery $8.93 Total: $34.31 Lunches for one week Packing a Lunch Loaf of Bread $1.68 Deli Meats & Cheese $6.78 Jar of Peanut Butter $2.50 Bag of Chips $2.50 Jelly $ 2.98 Mayo $2.75 Lunch Bags $1.50 Case of Water (24 count) $2.99 Total: $23.68 or $2.37 a day (10 days) Lunch for 2 weeks

20 Alternative #3 Salon Beauty Care Hair - Color and Style $ Nails Manicure/ Pedicure $45.00 Total = $ Beauty Care at Home Hair - Box of Hair Color $7.99 Nails Nail Polish $3.99 Nail care kit $4.99 Total = $16.97

21 Alternative #4 Ready-Made Meal Price = $11.99 Homemade Garlic Chicken Pound of Chicken $3.79 ½ lb. of Broccoli $0.79 ½ lb. of Carrots $0.69 Box of Pasta $0.99 Garlic Seasoning packet $0.79 Total = $7.05

22 Even if you have a lot of money budgeting is still important! Let s look at some wealthy celebrities who blew through millions of dollars.

23 Three Poor Millionaires Michael Jackson. In Jackson filed for bankruptcy because he could not pay back a $25 million loan on his home, Neverland Ranch.

24 Lindsay Lohan Owes the IRS $234,000 in unpaid taxes. Her finances are a mess," one insider said. "She lives very large, staying at the best hotels and traveling first-class. All the money she earns she spends, and then when it comes to taxes, she has nothing left.

25 Warren Sapp Made $82 million during his football career Filed for bankruptcy in 2012 Owed $6.7 million to his creditors. Owed nearly a million dollars to the IRS.

26 So How should you budget? TCA has helped millions of people learn to budget and manage their debt. Here is the strategy we have found works best.

27 The Budget Pie Recommended Budget Percentages 10% Housing 38% Transportation 18% Food Debt 5% Other Savings 13% 16%

28 Budgeting - a Piece of PIE Housing 38% Mortgage Repairs Taxes Insurance Miscellaneous Transportation 16% Car Payment Gas Insurance Groceries Debt 5% Credit Cards Student Loans Personal Loans Medical Bills Other 18% Entertainment Hobbies Shopping Dining Out Movies Savings 10% Saving for TODAY Saving for TOMORROW Saving for a RAINY DAY Saving for an EMERGENCY

29 Budgeting Example #1 A single woman percent of her income is commission based. Is this budget suitable for her? Remember: The recommended percentages are: Housing 38% Transportation- 16% Food- 13% Debt 5% Other 18% Savings 10% 13% 21% 8% 1% 23% 44% Housing Transportation Food Debt Other Savings

30 Budgeting Example #2 A retired couple -- their mortgage is paid in full. Is this a suitable budget for them? Remember: The recommended percentages are: Housing 38% Transportation- 16% Food- 13% Debt 5% Other 18% Savings 10% 0% 22% 11% 19% 11% 37% Housing Transportation Food Debt Other Savings

31 Budgeting Example #3 Newly married couple planning to have a baby. Is this budget suitable for them? Remember: The recommended percentages are: Housing 38% Transportation- 16% Food- 13% Debt 5% Other 18% Savings 10% 18% 5% 13% 10% 16% 38% Housing Transportation Food Debt Other Savings

32 Your turn!

33 Budgeting Step 1: Review Last Month's Spending See where your money went. Analyze where you can cut back. Online banking can categorize your money for expenses, such as dining, food and utilities.

34 Budgeting Step 2: Keep Records of Earning & Spending Help you organize and plan your spending Help you figure income taxes Tell where your money is going or should be going

35 Budgeting Step 3: Reduce Expenses Eliminate unnecessary routine purchases Look at your utilities and see how you can cut back Electric Water APS Limited Income Program (E-3) APS Medical Equipment Program (E-4) SRP Economy Price Plan SRP Medical Discount Great website for Energy Saving Turn faucet off when brushing teeth, shaving Saves 5-10 gal/person/day Install a faucet aerator on your bathroom sink Saves 5-10 gal/person/day Install a faucet aerator on your kitchen sink Saves gal/day Don't use your toilet as a waste basket Saves 3-7 gallons/flush

36 Explore Other Options Address your insurance costs -- Call and ask for a better quote Actively manage your credit Better credit = More options More financial options and better deals Call cell phone provider and negotiate for a better rate

37 Be a Smart Shopper Choose to do without. Don t be a brand snob. Cook from scratch. Have a shopping list. Learn how to read store price labels. Avoid expensive prepared or frozen foods. Buy in bulk to save money, but don t overbuy. Clip and use money-saving coupons.

38 Things to Remember Be honest about your spending habits and you ll end up with a much more realistic budget. Don t forget to budget for fun; budgeting isn t about total deprivation. Don t be afraid to change your budget; a good budget is always evolving. Earn more, or spend less, but definitely ACT YOUR WAGE!

39 Call: Take Charge America is a non-profit financial education and credit counseling organization. We are dedicated to helping people nationwide improve their financial futures through educational outreach, credit counseling and debt management solutions.