SPENDING PLANS

AKABUDGETS
Mrs. Bland Financial Literacy

Money Management Tools

Statement of
Financial
Position

What is my
financial
position
today?

Income &
Expense
Statement

How have I
managed my
money in the
past?

Determine what
changes to make

Spending
Plan

What is my
future money
management
plan?

Make
changes

Financial Plan

Balance
Sheet

Financi
al Plan
Cash
Flow
Statem
ent

Budget

Spending Plan aka Budget

A budget is a forecast of future cash inflows and

outflows.
Allows you to plan how you will spend your money
Created for a month, quarter, or year

Benefits
Provides guidance when making financial
decisions
Increase net worth
Helps set and reach goals
Analyze opportunity cost and trade-offs when
making decisions

Creating a Spending Plan

1.
2.
3.
4.
5.

Track Current Income and Expenses

Create Categories and Personalize
Allocate Money to Each Category
Implement and Control
Evaluate and Make Changes

Creating a Spending Plan

(budget)
Track Current Income & Expenses
Income/Expense Statement (Cash
Flow)
1.

2. Set Your Categories

1.
2.
3.
4.
5.
6.

Income
Fixed Expenses (recur every month, same amount)
Variable Expenses (different every month)
Investments
Savings
Other that are meaningful to you

Fixed or Variable Expenses

Cell phone bill

Groceries
Rent
Car insurance
Entertainment
Coffee
Credit card bill
Car payment
Medical expenses
Health insurance
School supplies
Gas
Eating at restaurants
Netflix
Clothing
savings

Savings

Pay Yourself First

Benefits

Liquid (you can access it at any time)

Safety net (emergency fund)
Greater flexibility in budget

Guidelines

10% of paycheck should go immediately

into savings
You should have at least 3-6 months
income saved
Establish savings before you start investing

Creating a Spending Plan

(budget)
3.

Allocate Money to Each

Category

Look at money from Cash Flow and

decide where to make changes
Consider goals, trade-offs, and
contractual obligations
Use the 3 Rs reality, responsibility, and
restraint

Spending Plan Guide

18%

10%

7%

15%
30%

Saving and
Investing 10%
Insurance 7%
Housing 30%
Transportation 20%
Food 15%
Other 18%

20%

What variables may cause these

percentages to be different?

Spending Plans

In order to have a balanced budget, all

money should be in a category

Extra money is called discretionary income

Add

to savings
Spend it

A shortage is called a deficit

Increase

income
Decrease expenses (fixed or variable?)

To be financially stable, you should NEVER

spend more than you earn (DEBT)

Creating a Spending Plan

(budget)
4. Implement and Control
the Budget

Money management/computer system

Internet-based spending plan program
Depository Institution (bank) program
Check register system
Envelope system

Creating a Spending Plan

(Budget)
5. Evaluate and Make
Adjustments

How well does it work?

Are you reaching your goals?
Do you need to make any adjustments?

Dont Blow Your Budget

Budgets should be balanced (Income = Expenses)

Discretionary Income (surplus) = extra money

Add

extra money to savings or variable expenses

Deficit = shortage of money

Decrease

some expenses
Strategies?

If you overspend on a variable expense, what

should you do?

Dont Blow Your Budget

Resources are Limited

Consider your needs vs. your wants
Examine the opportunity costs of your
purchase
Think before committing to new fixed
expenses
Use the 3 Rs Reality, Responsibility,
Restraint
Peer Pressure

Strategies?

Dont Blow Your Budget

Dont forget to figure in your annual

expenses

Insurance, property taxes, new tires,

tuition, etc.

Calculating Annual Expenses:

Dont Blow Your Budget

Be aware of strategies designed to get you

to spend more (Pricing)

Penetration Pricing (start with low price and

then slowly raise them)
Psychological Pricing ($1.99)
Premium Pricing (super high to show exclusivity)
Bundle Pricing (BOGO, 40% off, Free Shipping
with $50 purchase)
Optional Pricing (buy one thing, charge for addons)

Dont Blow Your Budget

Be aware of advertising strategies designed to get you

to spend more (Advertising)

Emotional Appeals Needs or Fears

Ideal

Kids and Families

Are you Cool Enough?
Amazing Toys?
Weasel Words
Put Downs
Heartstrings
Cute Mascots
Family Fun
Facts and Figures
Star Power
Bandwagon
Excitement
Scale

Dont Blow Your Budget

Make smart purchasing choices

Comparison shop
Negotiate
Coupons
Catalog
Internet
Second hand/thrift store/
Other?