Untitled Lesson

Personal Finance

Income is the starting

point for personal

financial

management

Earning Money

Developing a personal financial management plan

is unique to every individual. Spending and saving
goals should be considered in making a realistic,
workable plan. Perhaps the most important factor
when first developing a financial plan should be the
individual’s income.

Income is the money received (coming in) for labor

or services, the sale of property or goods, from
financial investments, or other services.

Multiple Choice

which

• j

• h

• a

• b

Knowing monthly

income allows the individual
to know how much money
is available to take care of
expenditures (to spend).

This allows the

individual to maintain
control of his/her money
and helps to achieve long-
and short-term financial
goals.

Earning money at a job is a first step towards being on your

own. Whether it’s an odd job for neighbors or part-time
employment, you can use that money to reach your goals. If
you’re looking for a job that gives you a real paycheck, think
about this.

Right now, you may be focused on just getting a job –

one you like, that fits your school schedule, and that pays
well. Good for now, but remember, too, that this job might
help you down a career path. Before you take just “any”
job, think about what you may want to do in the future.

What kind of job will help you get there?

Expand your thinking so that the jobs you take now

help you build skills you’ll need later.

First jobs will help you learn:

1) what you like and dislike in a job

2) the education and training you’ll need in that kind of
career.

Take a look at the following table. which lists a few

careers, the starting salaries for each, and the education it
takes to enter the career field.

Benefits of a

household budget

Household Budgets

Individuals should create household budgets and start tracking expenses as
soon as they begin their first full-time job. There are many reasons for creating a
household budget.

Creating a budget for spending and saving helps to monitor financial resources
so that an individual does not become over-extended. A budget offers an
organized way to establish short and long-term savings opportunities.

By carefully monitoring the
budget, an individual can
adjust expenses and
savings if there is a change
in income or expenditures. A
budget helps to compare
annual income with annual
expenses in order to meet
financial goals.

The benefits of creating a household budget are diverse. An individual
gains increased financial freedom when in control of personal finances.

A budget encourages an individual to save so that long-term financial
goals can be achieved. Budgets help adapt to changes in financial
circumstances, whether it be an emergency, loss of a job, or extended
sickness.

Budget analysis allows an individual to understand where money is
spent and to identify unnecessary expenditures.

Reasons for and

the benefits of

Savings

Savings is the portion of income not spent on current expenditures.
Because a person does not know what will happen in the future,
saving money should be a priority to make provisions for unexpected
events or emergencies that might occur.

Reasons for saving include:

●Providing a cushion for emergencies

. The sudden loss of income,

unexpected medical expenses, or the breakdown of a necessary appliance
can strain a budget and savings can help avoid going into debt.

●Planning for retirement . Adequate savings and/or investments often take
the place of the income that you will no longer get from your job, or when you
retire.

●Longer life expectancy . As a result of advances in geriatric medicine and
public health, people are living longer and need additional income on which to
live.

●Volatility (changing) of Social Security

. Social Security should not be

considered the primary source of retirement income and, therefore, savings
can be used to supplement income.

●Education. Costs for private and public
education rise every year and savings can
provide a means to meet the increased financial
demands.

● Making large, expensive purchases

. Savings

can assist in the purchase of items that are too
costly to purchase with monthly income. Buying
major appliances, purchasing an automobile, or
paying for a vacation can all be paid for by
saving a portion of income.

Without savings, unexpected events can result in
large financial burdens.
Benefits of saving money are diverse. Savings can
provide a “financial backstop,” encourage feelings of
security, and peace of mind.

Benefits of saving include :

●Encourages a sense of control over life events. Saving money to
live a better, more fulfilling life can be a great motivator.

●Lowers the stress level. Financial security decreases health
concerns.

●A positive example for children. Children learn strong lessons
when they observe parents saving for the future.

●Wealth building. Being able to accumulate wealth provides the
opportunity to multiply wealth through investments.

●The ability to pursue opportunities. Whether it is a personal
dream, family travel, or a job opportunity in a foreign country,
financial success through saving can make opportunities a
reality.

51.d: describe the uses of debt and
associated risks by comparing similarities and
differences