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Budgeting Budgeting

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Budgeting Budgeting Powered By Docstoc
					Budgeting
Presented by SunTrust Bank
Your goals
   What do you want out of life?
   When do you want to reach your goals?
   How much will each goal cost?

   Make a payment plan for yourself
   Don’t be discouraged
   Now set priorities
   Pay yourself first
Objectives
   Part I
    ◦ To learn how to set and follow a household
      budget
    ◦ To develop a better understanding of financial
      resources
   Part II
    ◦ To learn how to purchase large items responsibly
   Part III
    ◦ To understand the importance of building a
      strong credit history
    ◦ To learn how to build a strong credit history.
Part I - Household Budget
   Identify income
   Identify expenses
   Compare income and expenses
   Establish priorities and make changes
Get your spending in shape
   Percentage guidelines
    ◦   Housing – no more than 30%
    ◦   Food – 15-30%
    ◦   Utilities – 4-7%
    ◦   Transportation – 6-20%
    ◦   Loan payments – less than 20%
    ◦   Savings – at least 10%
The Ideal Budget?
High Housing Costs        High Debt




                Realistic Scenarios?
Fixed vs.Variable Expenses
   Fixed
    ◦   Rent
    ◦   Insurance
    ◦   Car payment
    ◦   Loans
   Variable
    ◦   Food
    ◦   Utilities
    ◦   Clothing
    ◦   Cable TV
Fixed vs.Variable Expenses
   Can you reduce your fixed expenses?
    ◦ Get a roommate
    ◦ Move to a less expensive house

   Can you keep from tapping into savings?
    ◦ You’ll have to wait longer to reach your goals
Step 1 – Identify your income
   After tax wages
   Child support
   SSI
   TANF
   Food stamps
   Tax refunds
   Other
Step 2 – Identify expenses
   Rent                Laundry
   Electric            Medical/Dental
   Gas                 Cable TV
   Water               Newspaper
   Sewer/Garbage       Credit card payments
   Telephone           Auto insurance
   Food                Other insurance
   Clothing            Child care/child
   Transportation       support
                        Gasoline
     Step 3 – Compare Income &
     Expenses
   Your total monthly         Your total monthly
    income:                     expenses:

$                           $




           Money remaining each month:

                $
Step 4 – Establish priorities and
make changes
 Create an easy filing system
 Use a regular bill-paying system
 Know what to keep & what to throw
  away
 When expenses exceed income, or if you
  want to save more money, there are two
  options
    ◦ Increase income
    ◦ Cut expenses
What to do in a bind?
   Know your legal rights
    ◦ As a tenant in an eviction process
    ◦ With creditors & debtor
    ◦ Benefiting from a payment plan

   Sign-up for one of the CSC’s legal clinics
Increasing income
   Look for a better paying job
   Take a second job
   Turn a hobby into extra income
   Other ideas…?
Cutting expenses
   Shopping
    ◦   Don’t shop when you’re hungry or bored
    ◦   Take advantage of sales
    ◦   Compare prices at different stores
    ◦   Compare unit prices (cheaper in bulk)
    ◦   Use coupons and rebates
    ◦   Think before you buy
    ◦   Make a list and only buy what’s on it
    ◦   Nonfood items cost more in supermarkets
    ◦   Rent tools & equipment instead of buying
    ◦   Buy generic & store brands
Cutting expenses
   Food
    ◦   Plan meals & shop w/ a list
    ◦   Enroll in “Healthy Eating on a Budget”
    ◦   Buy fruits & vegetables in season
    ◦   Prepared foods usually cost more
    ◦   Pack your lunches & snacks
    ◦   Eat out less
Cutting expenses
   Transportation
    ◦   Use public when possible
    ◦   Buy a used vehicle (lower monthly payments)
    ◦   Regular maintenance on car
    ◦   Use lowest octane gas recommended
    ◦   Compare fares on different airlines
Cutting expenses
   Phone Service
    ◦ Shop for best long-distance calling plan
    ◦ Use prepaid discount cards
    ◦ Get rid of services you don’t use often if they
      costs more (call waiting)
    ◦ Limit your long-distance calls and call when
      rates are lowest
Cutting expenses
   Housing
    ◦ Warm weather: adjust thermostats at night &
      when no one’s home
    ◦ Cold weather: lower heat when no one’s
      home
    ◦ Consider energy saving devices & bulbs
    ◦ Learn to make repairs yourself
    ◦ Lower your water heater temperature
Cutting expenses
   Entertainment
    ◦ Look into free events for adults & children
    ◦ Rent a movie instead of going to cinema
    ◦ Visit your library for events & movies
The Earned Income Tax Credit
(EITC)
 What is the EITC?
 Who can get the EITC and how much is
  it worth?
 Which children qualify for the EITC?
 How does the EITC work?
 How do you get the EITC?
 Does the EITC affect public benefits?
Part II – Money Management
   Renting to own
   Credit cards
   Loans
   Financial accounts
Renting to own
 Decide to buy a sectional couch on a
  rent-to-own plan
 Store rents it for $99.99/month
 Add tax & service plan costs
 Own the couch in 24 months
Renting to own
   Monthly rental cost ……… $99.99
   Service plan ………………. $9.99
   Total monthly cost ……….. $109.99

   TOTAL COST ……….. $2,639.74

   Base Price of couch ….. $1,499.99

   Cost of lease service …. $1,139.75

      You pay this much more than it’s worth!
Renting to own
   Defaulting on a payment
    ◦ Repossession
    ◦ Consider alternative payments
      Credit card
      Installment sales

   Save, save, save!
Credit cards
   You pay for the convenience of credit
    ◦ Pay for large purchases over time
    ◦ Handle emergencies
    ◦ Buy over the phone or online
 Helps you establish credit – when you pay
  on time
 Can you balance your budget after
  including another payment?
Credit cards
   Important terms
    ◦   Finance charge
    ◦   Interest
    ◦   Annual Percentage Rate (APR)
    ◦   Balance
    ◦   Finance charge
    ◦   Grace period
    ◦   Annual fee
    ◦   Other fees
Beat the interest
 You saved $50 by shopping around for a
  $500 sound system
 You decided to make only the minimum
  payment of $25 each month

 You’ll end up paying a total of $588 for it
 That’s $88 in finance charges (18% APR,
  using adjusted balance method, the
  cheapest)
 It’ll take you 2 years to pay it off, instead
  of 11 months with $50 monthly payment
Loans
 Is it a “need” or a “want”?
 Can you afford the extra payment?
 Will the new payment put you over the
  20% debt limit?
 Will the product depreciate/be used
  before loan payments end?
Loans
   What are lenders looking for
    ◦ Stability in residence & job
    ◦ Credit history
    ◦ Amount of credit you can afford based on
      current income & expenses
Loans
   Low-cost borrowing options
    ◦ Your own savings
    ◦ Insurance policy
    ◦ Retirement plan
   Be prepared when you apply
    ◦   Make a list of all your debt
    ◦   Take a list of credit references
    ◦   Know how much you can pay in installments
    ◦   Know how long it will take to pay it back
    ◦   Detail how much you need and what for
Different accounts
   Regular checking accounts
    ◦   Is it really “Free” checking?
    ◦   Minimum account balance
    ◦   Free checks
    ◦   Direct Deposit only

   Consider benefits of Credit Unions
Different accounts
   Accounts that make money on your
    money
    ◦   Savings accounts
    ◦   Money market accounts
    ◦   Certificated of deposit
    ◦   Stocks, bonds & mutual funds
    ◦   Retirement accounts
Part III – Building credit history
   DO:
    ◦ Open a bank account
    ◦ Pay all bills on time
    ◦ Review your free credit reports
      (www.annualcreditreport.com)
    ◦ Use credit cards – wisely!
    ◦ Seek assistance if problems arise
To build a strong credit history
   DO NOT:
    ◦ Overdraw bank accounts
    ◦ Miss payments on bills or loans
    ◦ Let others use your accounts or credit cards
Manage your credit
 Review your free credit reports before
  applying
 Shop for the best deal
 Don’t get more credit than you need
 Know when to use credit
 Mind the 20% limit of take-home pay
 Know the results of bad credit

				
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