Budgeting is an important and vital part of personal finance. The seminar focuses on the importance of mindset to create and stick to a budget. It examines the psychology of spending and our relationship with money. The goal is to educate attendees on key budgeting terms, motivations, pitfalls and the steps to start a budget. A budget is a spending plan that you decide upon. It is based on how much you make in income and what your monthly expenses are. By understanding your monthly income and expenses, you will be better able to manage your cash flow and determine how much debt, if any, you can assume.

1. Personal Finance: Creating a Spending Plan
Budget For The Life You Want
Jason Vitug
@jasonvitug

2. Introduction
• The plan is to discuss the benefits and process
of budgeting.
• The goal is to understand how budgeting can
lead to living richer lives.
• The takeaway is to know key terms, identify
your dream lifestyle, set financial goals and
start the budgeting process.
www.phroogal.com
@phroogal

3. Do you want to be
the Starbucks loving
apartment renter or
the Folgers Crystal’s
homeowner?

4. Saving a few extra dollars a
month won’t get you into a
new home.
----------
Knowing exactly where your
money is going will help you
reach your financial goals.

5. Psychology of Spending
• Are you seeking instant gratification
delaying true satisfaction.
• Do you know the differences between
“needs and wants?”
• Are you sacrificing “what you love for
what you like?”
www.phroogal.com
@phroogal

6. Spending Habits
• Habit Spending
– Not out of necessity or wants just habitual (e.g. morning
coffee, lunches, brand loyalty).
• Bargain Hunting
– Proactively seeking discounts and sales to validate a
purchase that may be unnecessary.
• Impulse Buying
– Perception of value or want/need from actual reality.
• Retail Therapy
– Mood enhancing because it mimics the feeling you’re in
control.
www.phroogal.com
@phroogal

7. Saving versus Spending
Spending over Saving
• Unknown Future: Spend rather than save because instant
gratification is now and future need is unknown.
• Present Bias: Making inconsistent decisions over time
favoring instant gratification over long term returns.
Savings over Spending
• Prioritize saving money immediately and use automation
tools.
• Reward yourself for reaching savings goals.
• Build wealth and avoid lifestyle inflation.
www.phroogal.com
@phroogal

8. What tool can help you
prioritize savings, curb
spending and achieve
your goals?

9. The Six Letter Word
BUDGET and the
reasons we don’t:
• Associated with
limitations.
• Realizing there
might not be
enough money.
• Fear lifestyle
change.
www.phroogal.com
@phroogal

10. Budget = Spending Plan

11. What is a budget?
• Defined as a financial spending plan.
– Helps achieve quantifiable financial goals.
– A tool to measure performance and cope with
potential adverse situations.
• A financial framework to support lifestyle
choices.
– Includes income, expenses, financial goals, savings
and debt repayment plans.
www.phroogal.com
@phroogal

12. Budgeting mindset
Excuses to Start How to Start
• Tedious and boring
• Easy to procrastinate
• Feeling there is never enough
money
• Hard to confront past decisions
• Goals are overwhelming
• Money isn’t an issue
• Fear of lifestyle changes
• Be specific and think success
• Stay realistic and organized
• Track everything (money
in/out)
• Monitor progress and expect
setbacks
• Reward yourself along the way
• Make it easy and use free tools
www.phroogal.com
@phroogal

13. Budgeting
Advantages > Disadvantages

14. Reasons why you should budget
• Creates a framework to reach milestones
and achieve quantifiable goals.
• Helps you buy things you need and want
through prioritization.
• Allocates resources and reduce waste.
• Supports reaching your dream lifestyle.
www.phroogal.com
@phroogal

15. A budget isn’t an exercise at
deprivation but a tool to
increase awareness of what’s
happening with your money.

16. Budgeting process
• Calculate your net worth
• Determine what you want to accomplish
– Lifestyle choice (how you want to live)
– Financial goals (what you want to buy/achieve)
• Track your spending
– Debit/credit cards, receipts, software programs, mobile apps
• Develop your budget
– Calculate all income sources
– Identify fixed and variable expenses
– Set savings and debt repayment goals
• Implement your budget
• Analyze your budget and make adjustments
www.phroogal.com
@phroogal

17. Calculate your financial wealth
• Calculate your Net Worth
– Net worth is the amount in which your assets
exceed your liabilities. The difference between
what you own versus what you owe.
• List Assets
– Savings, property, investments, etc.
• List Liabilities
– Debts owed, loans, mortgages, taxes.
www.phroogal.com
@phroogal

18. Envision your dream lifestyle
• A lifestyle goal is how you live or plan to live your
life. It’s the style of living that reflects your
attitudes and values.
• Don’t confuse living a lifestyle with the ability to
purchase and consume. From buying expensive
cars or homes and to another extreme frugality.
• Envision the lifestyle you want to live.
• Then, identify and prioritize the financial goals.
www.phroogal.com
@phroogal

19. What are your financial goals?

20. Characteristics of financial goals
• Specific
– A cost or price point
– Timeframe and deadlines
• Measureable
• Reasonable and realistic
www.phroogal.com
@phroogal

21. Identify your financial goals
• What do you want to accomplish?
– Financial goals are monetarily quantifiable aspects
of your life.
– They are things that can be purchased such as
goods, education and experiences.
– They are specific goals such as savings goals, debt
repayment and college tuition.
www.phroogal.com
@phroogal

22. Financial Goals: Savings
• Emergency fund
– Calculate monthly living
expenses and save 6
months in a liquid savings
account.
• Short-term goals
– Holiday spending,
vacations and big ticket
items.
• Mid-term goals
– Mortgage down payment,
car purchases, etc.
• Long-term goals
– 401(k), IRA contributions,
investments.
www.phroogal.com
@phroogal

23. Financial Goals: Debt-Free
• Pay off all debt
obligations.
– Debt is a ball and
chain preventing
you from achieving
financial freedom.
• Discover debt
repayment options.
• Identify additional
funds to maximize
debt repayment.
www.phroogal.com
@phroogal

24. Budgets should evolve
as goals are reached
and desired change in
lifestyle.

25. Starting a Budget
• Stay clear of mental accounting.
– Use the Traditional or Automated methods.
• Paper/Excel or software (e.g. Mint.com).
• Learn if you’re living beyond your means.
– Categorize an entire month’s income and
expenses. Calculate the difference to determine
how much money is coming in versus going out.
– Realization you may need to cut back to achieve
goals.
www.phroogal.com
@phroogal

26. Basic Elements of a Monthly Budget
FIXED EXPENSES:
Rent/Mortgage. $
Credit payments $
Insurance. $
Medical $
Other $
FLEXIBLE EXPENSES:
Food $
Clothing $
Transportation$
Household $
Personal $
Entertainment $
Other $
TOTAL EXPENSES $
www.phroogal.com
@phroogal
INCOME SOURCES
Monthly Take-Home Pay $
Interest Income $
Dividend Payments $
Additional Income $
TOTAL MONTHLY INCOME $
LESS TOTAL EXPENSES $
NET (Income – Expenses) $
SAVINGS GOALS
Emergency Fund $
Savings $
Certificates $
Holiday / Vacation $
Other Savings $

27. Budget Method: Step-by-step
1. Calculate your income and expenses.
2. Make a list of all income sources and calculate total monthly income.
3. Keep a record of one month’s fixed expenses and discretionary spending.
4. Organize based on categories and total expenses such as housing,
transportation, food, utilities, credit card payments, etc.
5. Using paper or a spreadsheet, calculate your income compared to your
expenses.
6. Analyze the results and calculate how much you can save and how much
more you can pay towards debt.
7. Determine where you can decrease fixed expenses and cut spending to
free up money to prioritize debt repayment and grow savings.
8. Adjust your budget accordingly as financial goals are met.
www.phroogal.com
@phroogal

28. Budget Methods: Buckets
• Difficult to track every little expense thus making simple bucket methods useful.
• Caveat: The more details you know about your spending habits the better.
• 60 Percent
– 60% on monthly expenses. Includes housing, utilities, food, transportation and other fixed
payments.
– 10% on retirement, 10% on short term savings, 10% on debt reduction, 10% on spending
• 70-20-10
– 70% on living expenses. Monthly expenses such as rent and car payments, memberships, and
discretionary spending.
– 20% on savings goals. Money save for retirement (10%), emergencies (5%) and specific goals
(5%).
– 10% on Debt Repayment. Pay down debt obligations and credit cards.
• 50-30-20
– 50% on fixed costs. Monthly expenses such as rent and car payments, memberships,
subscriptions, etc.
– 20% on financial goals. Money set aside for debt repayment and savings/retirement goals.
– 30% on personal spending. Discretionary flexible spending.
50-30-20 Courtesy of Laura Shin, Learnvest
www.phroogal.com
@phroogal

29. The right budget doesn’t keep
you from spending but tells you
how to save and spend your
money to maximize enjoyment.

30. Budgeting should help you…
1. Save and spend your money.
2. Pay yourself first.
3. Repay debt and loan obligations.
4. Reduce expenses.
5. Increase income earnings.
6. Focus attention on priorities.
7. Live your dream lifestyle.
www.phroogal.com
@phroogal

31. Budget Pitfalls
• Unknown personal
motivations.
• Remains static.
• Restricts living in
the present
moment.
• Budgeting for the
life you want but
can’t afford today.
www.phroogal.com
@phroogal

32. Stay motivated
• Visualize success
• Stay organized
• Be realistic
• Track and monitor progress
• Expect setbacks
• Reward yourself along the way
www.phroogal.com
@phroogal

33. Resources
• Net worth calculator: http://goo.gl/V6cb33
• Excel budgeting worksheet: http://goo.gl/V6cb33
• Software budgeting tools
– Ask your bank or credit union about budgeting tools tied to your
accounts.
– Free budget tools: Mint.com and Personal Capital.
• Ask questions on budgeting: Phroogal.com.
• Debt Repayment/Budgeting Tools
– Debt Payoff Calculators
– General debt payoff tool: ReadyforZero
– Manage student loans: Tuition.IO
– Student loan consolidations: CUStudentLoans
www.phroogal.com
@phroogal

34. What’s the secret equation to
wealth?

35. Wealth = Money In - Money Out

36. Learn more about budgets and spending plans at
www.phroogal.com