Vocab
Budget
Tool that helps a person use every dollar wisely.
Why Budget?
To be prepared to achieve financial goals.
Rent/Mortgage
Need
Make 1000/month-Spend $400 on going out
No, wants 30% which is $300
What is the most important category? Why?
Needs. This includes rent/mortgage, food, electricity, heat.
Income
Total of all money earned in a given period of time.
50% of Budget
Neccasities
Movie Theater
Want
$1250
What category is the easiest to change? Why?
Wants
Needs
Things that are absolutely necessary.
30% of Budget
Wants
Streaming TV
Want
$600
List 3 things in the need category?
Housing
Utilities
Groceries
Internet?
Basic Phone Plan
Things that are enjoyed but not essential
20% of Budget
Savings/Debt
Groceries
Needs
How much can they spend on rent making $2000/month and have $200/month already in needs.
$800
If you make $2500/month, what is a reasonable about to pay on a car loan per month? Why?
20% is $500. It would be wise to spend no more than $300/month to have money to service other debt of save.
Saving
Amount of money set aside for future expenses.
50-30-20 Rule
50% Expenses, 30% wants, 20% savings/debt
Saving/Debt
Make $1500/month, spending $300 on car loan
Yes, but 20% of $1500 would be $300. For this to make sense no other debt and this would not allow any savings.
What is the most common mistake when making a budget?
Estimating income too high. Better if you have to estimate, estimate low.