Name: Period: Orientation to Business Chapter 28 Notes Money Management Budget o Includes (3 key things) 5 steps 1. Set Goals 2. Estimate Income (define each) Income: Gross Pay: Deductions: Net Pay: 1
Withholding: 3. Estimate Expenses money you spend on food, rent, and clothing Fixed expenses Example: Variable expenses Example: 4. Plan for Savings 5. Balance and adjust the budget Most difficult step of budgeting Total for a period should equal the. Budget variance What should you do if your budget is in the negative? 2
Must make adjustments to budget if it is not balanced Orientation to Business Chapter 29 Notes Checking Accounts About of U.S. households have checking accounts. Customer deposits money in an account and receives a book of checks. How does it work? Demand deposits Types of checking accounts o Regular account Designed for : Minimum balance: Withdrawals include : Service Charge? o Interest-Bearing Account 3
Interest? Minimum balance: o Joint Account o Signature Card Account Services Overdraft Protection o Overdrawn- o What happens? Stop Payment- Debit Cards- Online Checking/Banking Account Records Writing a check o 3 people/parties on a check Payee 4
Drawer Drawee o Check Register- Should include Depositing a check o Need to fill out a deposit slip lists cash, checks, etc. o Need to record in your check register o Endorsement What does this prevent? Restrictive Endorsement- Blank Endorsement- Special Endorsement/endorsement in full- Bank Statement- What does it include? Canceled check- 5
What happens to the money in your account? Bank Reconciliation Balancing your checkbook identify outstanding checks o Add in deposits you ve made that haven t been recorded, subtract service fees you didn t record, add in interest if it is an interest bearing account. How can finding errors help? Savings Orientation to Business Chapter 30 Notes Reasons for Saving Money Save for: All savings involve some sacrifice. o Opportunity cost Earning Interest on Savings What do bank use your money? Your money is being used to lend money to someone else, so you receive the rental fee/interest. o Depends on 3 factors: 6
1. 2. 3. Simple interest Example: Compound interest o How is interest earned? o Example: Rule of 72: Types of Savings Accounts Traditional Savings Account o 2 types: 1. --all of the deposits and withdrawals are recorded in a book that the depositor keeps 2. Statement savings account- 7
o With either, you can withdraw money at any time without penalty. o Is interest high or low? o Often, banks charge a service fee if balance falls below minimum. Certificate of Deposit (CD) o Minimum amount: o Timeframe: o Maturity date o Interest? o Is there a penalty? And what happens? Money Market Fund o Is interest rate the same? o Can withdraw money at any time. o Is a minimum amount needed? o Can only write a limited number of checks, each with a minimum balance of up to. o Is it insured by FDIC? Money Market Deposit Account- How is it different from Money Market fund? 8
Advantages and Disadvantages of Savings Accounts Main advantage: --government agency that insures bank accounts. Even if a bank fails, the FDIC will replace accounts for up to $250,000. Money markets are not federally insured. Liquidity- Disadvantages o Inflation Risk Example: Cost of savings accounts 9