Personal Finance and Money Management

Principles of effective personal money management

Income: Starting point for personal financial management

• Income: money received for labor or services (work), the sale of property or goods, financial investments

  • Knowing monthly income allows a person to know how much money they have for expenditures

• Expenditures: Money spent on things

  Knowing these things can allow a person to set long-term and short-term financial goals!

Creating a Budget

• Creating a budget allows a person to keep track of their spending and make long-term and short-term savings goals

  • Budget: A plan for spending & saving money

• To create a budget:

  • Start with income (how much money will be available)

  • Look at bills (expenditures)

  • Add in money needed for food, transportation, entertainment

  • Savings/investments

Multiple Choice

A budget is:

• A plan for a trip

• A plan for spending

• Time set aside for entertainment

• None of the above

Multiple Choice

Making a personal budget allows a person to set short-term and long-term spending and saving goals?

• TRUE

• FALSE

Benefits of a Budget

• 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.

Multiple Choice

Which of the following is NOT a benefit of a BUDGET?

• Greater financial freedom

• Losing money on the stock market

• Helps someone prepare for emergencies

• Encourages a person to save money

Reasons for saving

• Savings: Money set aside for future purchases or emergencies

There are many reasons for saving money including:
- Providing a cushion in case of loss of job or emergencies
- Planning for retirement
- Education costs
- Making large, expensive purchases like homes, vehicles, appliances, vacations

Without savings, unexpected events can result in large financial burdens

Multiple Select

Which of the following are reasons for saving?

• Making large purchases

• Planning for retirement

• Putting money aside for emergencies

• Educational costs

Benefits of Saving

There are many benefits to saving money:
- Money for investments
- Lowers stress level
- Allows for wealth building
- Allows one to persue opportunities: personal dreams, travel, overseas jobs

Multiple Choice

TRUE or FALSE? There are NO benefits to saving money.

• TRUE

• FALSE

Debt & associated risks

• Debt: An amount of money owed to another

• Debit: Using a card to spend cash from your bank account

• Credit: Making a purchase now and paying later with interest added

• Interest: An additional amount of money you are charged for a debt

• Bankruptcy: A legal proceeding involving a person or business that cannot repay their debts

Match

Match the following

• Bankruptcy

• Interest

• Credit

• Debit

• Debt

A legal proceeding; debt can't be paid

A fee added to borrowed money

Buying now and paying later

Same as cash

Money owed

• A legal proceeding; debt can't be paid

• A fee added to borrowed money

• Buying now and paying later

• Same as cash

• Money owed

Multiple Select

Why is it better to use cash or a debit card instead of making a purchase using credit when possible? Choose all that apply.

• You pay the exact cost of the item

• There is no benefit to using cash

• You do not have to pay interest

• You have to wait to take your item with you