Intro to Finance Notes - Unit 1 - Budgeting

1. Mr. Elsesser
Introduction to Business

2.  Answer these questions…
What steps do you think need to be
taken in order to create a budget?
 What can happen if you do not
have a spending plan?
 Identify some circumstances that
may dictate when a budget needs
to be changed.


3. Start by tracking income & expenses for one or two
months to prepare a realistic budget.
 Budget:



A spending and savings plan for using your money to best
meet your wants and needs based on your income and
expenses.
Your goal is to create a balanced budget:
 Balanced Budget:

Ensuring that the total of savings and expenses are the
same as your total income amount.

4. Your budget/spending plan should have the following
categories:

 Income
 Money earned by individuals.
 Fixed Expenses
 Expenses that stay the same each month.
 Variable Expenses
 Expenses that can change each month.
 Investments
Money that you hope will generate interest or appreciation.
 Savings
 Money that you have left over after all expenditures.

5.  Step 1: Setting Financial Goals
 What do you wish to do with your money?
 Step 2: Estimating Your Income
 Include all take home pay, income on investments and
savings. DO NOT INCLUDE MONEY YOU MAY NOT GET OR
NOT YET EARNED (Bonuses, gifts, scheduled jobs).
 Step 3:
Budgeting for Unexpected Expenses
and Savings
 Deposit money to vacation accounts, personal goals, and
emergency funds.

6.  Step 4: Budgeting for Fixed Expenses
 What are all of your monthly bills?
 Step 5: Budgeting for Variable Expenses
 Expenses your incur that are either unexpected or varied.
 Heating and cooling, pleasure or fun, medical expenses
 Can sometime depend on
CONSUMER PRICE INDEX (CPI):
 Measure of change in prices for commonly purchased goods
and services in the United States.

7. What kind of cost???
FIXED, VARIABLE, OR PERIODIC?
Expense
Fixed
Loan Payment
Electric Bill
Variable
Periodic
X
X
Twice-yearly Insurance
Payment
X
Dinner and Movies
X
Gas
X

8.  Step 6: Recording What You Spend
BUDGET VARIANCE:
 Difference between the budgeted amount and the actual
amount that you spend.
 Step 7: Reviewing Spending & Saving Patterns
 Reviewing your financial progress
 Are you falling behind on bills? Have money left over?
 Revising your goals and adjusting your budget.
 What changes in your actions do you need to make?

10.  …Helps you determine where you are spending
your money currently.
 …Helps you decide where to spend your money
in the future.
 …You have an organized way to save for things
that cost more.
 …Puts you in control of your financial future,
beginning NOW.

11.  …Are less likely to know what they
have.
 …Have no plan, often coming up short
before their next paycheck or allowance.
 …Are almost certain to have no plan to
save for more expensive spending goals.

12.  Having a budget will not solve financial
problems.
 Budgets need to be well planned and
include ALL expenses/incomes.
 Budgets need to be practical.
 Budgets should be flexible.
 Budgets should AIM to help you create
savings.
 Budgets may need to be adjusted or
changed due to various circumstances.