1. GENC3003Personal Financial Planning Andrew Hingstonandrew.hingston@unsw.edu.au Unit 2: Budgets

2. 2 What is a budget? It is a plan for your money over the next year: Income from working, parents, youth allowance Expenses from … Income – Expenses = Savings (or Dis-saving if negative!) It is forward looking (over next year) But future is uncertain … So actual income and expenses will be different Budget is a “best guess” Usually best to have “average monthly” and “total yearly”

3. 3 What does a simple budget look like?Budget for 200X

4. 4 Why have a budget? Knowledge of your finances = power over them Know where our money comes from (income) Know where the money is going (expenses) Identify areas of over-spending to cut back … which will find extra money to save Helps us to be disciplined with our money

5. 5 Discussion What do difficulties do you think people have when making a budget? What difficulties do they have sticking to budgets?

6. 6 Regularly tracking expenses Track all income and expenses for two months … before making your first budget = much more accurate budget! Then track expenses after making budget … to see whether you are sticking to budget

7. 7 What are some tips? Make tracking expenses easy as possible Use software (Quicken or Money or other) Make habit of collecting receipts Use eftpos and download transactions from website Be realistic with your budget Allocate enough money for having some fun Be flexible – the future is uncertain Add “miscellaneous” – preferably 10% of total expenses Aim to always save at least 5% of your income If you can’t, then get a casual job or cut back in expenses

8. 8 Expense tracking methods Extreme tracking Track every dollar, every month (using software) Best method but some people can’t keep it up! Electronic tracking Track all eftpos transactions + total changes in cash Good but where is all the cash being spent?

9. 9 Audit tracking Track every dollar for only two months a year Good but what if they are not representative of the other months? Fixed savings tracking $X per month is withdrawn from transaction into savings account You are free to “spend” the rest Controls total expenses but where is it all going? Match method to personality type It must be sustainable over the long-term!

10. 10 Expense tracking assignment See course outline for detailed information Track all income & expenses Using spreadsheet provided at website Submit spreadsheet on website at checkpoints Read course outline for instructions on tricky issues Irregular and large bills and expenses Irregular income and holiday work Special instructions for people living with their family

11. 11 Tips for recording expenses Ask for receipts whenever you buy something. Update your spreadsheet each day Use “Task scheduler” to make it open at 8pm each day Count cash at start of week Count cash one week later Note ATM withdrawals and expenses Reconcile change in cash vs expenses Missed something? Put as “miscellaneous”

12. Stop and read Now read: Chapter 2 Your Budget 12