Personal Finance

1. A Month In A Life!
• Standard –Planning &
Money Management
• Students will be able to
• Create a personal balance
sheet. Using research from
online sources create a
monthly personal budget
In this lesson you will:
Cite textual evidence from findings
and accurately estimate household
living expenses, taxes, potential
savings, and an emergency fund

3. How does budgeting help
consumers balance
income, spending and
savings goals?

4. What is
Budgeting?
“A budget is a
written record of
the money that
flows in and out
of
your household
every month.”

5. “What does it mean to be
financially responsible?”
What was the last big purchase you made?
What decisions and research went into the
purchase?
Are you still happy with the purchase?

6. Creating a Personal Budget
 Track your expenses
 Figure out the amount
of money you’re
spending
 What do you have to
spend?
 What are you spending
that is not a necessity?

7. Then --
You must decide …
Do You Need It or Do You Want It?
Needs are the very basic things we
must have to survive.
Wants are the things that make
life more interesting and fun, but you
could live without them if you had
to.

8. What are spending plans?
 Spending Plan
◦ A financial statement used to assist in money
management comprised of income and expenses
 Income - money earned or received
 Expenses - money spent
◦ Fixed Expenses - stay the same every month, due on a
certain date
◦ Flexible Expenses - vary month to month, can be decreased
or eliminated

9. Two Types of Expenses
1. Essential or Fixed expenses – HAVE to
have in order to live:
mortgage or rent, insurance for auto & home,
car payments, taxes
Essential or Variable expenses:
car maintenance, gas, food, electricity, phone
2. Non-essential expenses–DON’T HAVE
to have in order to live:
Video games, books, movies

10. Organize Budget Expenses
Fixed vs. Variable
What
would you
say to
someone
who is
creating a
budget for
the first
time and
wants to
copy their
friend’s
budget
exactly?
Click
To Play
3:00

11. Monthly Budget Example

12. Disposable vs. Discretionary
Knowing the difference is
important to budgeting

14. How do taxpayers pay taxes?
Income Tax
Payroll
Tax
Property
Tax
Sales
Tax
Excise
Tax

15. Income tax Income tax - tax
on earned and
unearned income
Earned income -
money earned from
working for pay
Unearned income -
income received from
sources other than
employment
Example: Wages and
salaries earned from
employment
Example: Interest
earned from a
savings account

16. Components of income tax
Federal
income
tax
State
income
tax
Income tax

17. Federal Income Tax
Tax is
determined by?
Paid by? Helps fund?
• Earned
and
unearned
income
• Higher
income =
more tax
paid
• Majority
of people
living in
the U.S.
• Operations of
federal
government
• Government
programs
• education
• defense of
the nation
• disaster
relief

18. State Income Tax
Tax is
determined by?
Paid by? Helps fund?
Does Tennessee
have a state
income tax?
• Earned
and
unearned
income
• Higher
income =
More tax
paid
• Those living in
states with a
state income
tax
• Not all states
have a state
income tax
• Varies by state
• Examples:
• State
highways
• Operations of
state
government

19. Payroll Tax
Payroll tax – A tax on earned income
that supports the Social Security and
Medicare programs (also known as
FICA)
Tax is
determined by?
Paid by? Helps fund?
• A set
percentage
of earned
income
• Deducted
out of
paycheck
(except for
self-
employed)
• Individuals
who earn
income from
working for
pay
• Employers
• Social
Security
program
• Medicare
program

20. 2021 Tax Brackets

21. Social Security & Medicare
Payroll Tax Responsibilities
Employer Pays & Employee Pays
 Social Security withholding = 6.2%
 Medicare withholding = 1.45%

22. What is Social Security?
Purpose Tax charged
• Income for:
• Retirees
• People with profound
disability
• Children who have
lost a parent
• A person with children
who has experienced
the death of a spouse
• 6.2% of earned
income

23. What is Medicare?
Purpose
Tax
charged
• Helps pay for health
care for senior citizens
• 1.45% of earned
income
• No limit

24. Employers also pay Social Security
and Medicare
Match their employees tax
contributions
Self-employed people pay both the
employee and employer contributions
Employee
contribution:
$100
Employer
contribution:
$100
Employer
pays $200 in
payroll taxes
to the federal
government

25. Tax Structures
• Proportional
• each income group has the
same percentage rate of tax to
pay – 10%
• Regressive
• lower income individuals pay
a greater percentage of their
income in taxes than do the
upper income individuals
• Progressive
• lower income
individuals pay a lower
percentage of their
income than do the
upper income. As
income increases, so
does the percentage of
taxes paid.

26. State Tax – progressive taxes

27. Individual Taxes Paid Taxes as a
Income % of Income
Proportional Taxes
1 $10,000 $1,000 10%
2 $50,000 $5,000 10%
3 $100,000 $10,000 10%
Regressive Taxes
1 $10,000 $500 5%
2 $50,000 $2,000 4%
3 $100,000 $3,000 3%
Progressive Taxes
1 $10,000 $300 3%
2 $50,000 $2,000 4%
3 $100,000 $5,000 5%
Illustration: Proportional, Regressive, & Progressive Taxes
Examples of the 3 Tax Classifications

28. “Good” taxes
are generally considered to be
progressive
while “Bad” taxes
are considered to be
regressive.

29. Property tax
 Tax on something you
own
 Usually expensive like
your house or boat
 $100,000 home
◦ 5% property tax rate
 100,000 X .05 = $5,000
property tax

30. Estate tax
 Tax on
inheritance
 Sometimes
called “death tax”
 In US today,
leave $11.58
million to heirs &
pay no federal
estate tax

31. Gift tax
 Tax on gifts or
rewards
 Games shows,
gambling, lottery
 Rate depends on
gift
 35-60 %
 Incentive?

32. Insurance
Health Disability Life
What is
it?
Provides
financial
protection for
injury and
illness
Replaces a
portion of
income if
unable to
work
because of
injury or
illness
Provides a
specific sum of
money to
beneficiaries if
an individual
dies
When is
it
needed?
Always!
Almost
always
If others
depend upon
an individual
for financial
support
(families with
children)
May be provided by the employer

33. Balancing Act
 At the end of the month, break everything
down into categories.
 Is your income greater than your
expenses?
YES! – Great, then you can save.
NO! – There’s a problem!

34. Expenses Greater Than
Income?
 What can you cut
out?

35. What To Do with Your
Surplus
 Plan ahead and save
when you can!
 Have financial goals:
college, new car,
vacation, paying off
credit cards, saving
for a home, etc.

36. A Month In A Life - Project
• Determine your take-home pay
• Set aside pay to pay yourself first
• Zero out your monthly expenses
• Create an independent adult’s budget
• Create a presentation to reflect on the process of budgeting

37. Determine Your Net Pay After
Deductions
Use the ADP Salary Paycheck Calculator
• Choose the State you live in
• Pay Frequency = Monthly
• Use 2021 W4 = Yes
• Federal Filing Status = Single
• Leave all other values as they are
• Record your results in Major Expenditure Worksheet

38. Live in Idaho – Annual Salary $100,000
ADP Salary Paycheck Calculator

39. Major Expenditure Percentages
 Identify the average percent
of net income spent in a
specific category
 Use as a guide when
making spending decisions
◦ Percentages should be
adjusted to meet individual
values, needs and wants
 Other includes items such
as:
◦ Clothing
◦ Personal care
◦ Entertainment
◦ Donations

40. Determine Your Detailed
Planned Budget
Multiple “Monthly Net Pay” x planned
major expenditure percentage
For Example
Housing = $5954.21 x .30 = 1782.36
Record the answer in the Housing Column

41. • Now that you have determined your “Monthly Net Pay”
what type of lifestyle will you be able to live as a result?
• What might be the benefits or challenges?
Now that you have determined your “Planned Major
Expenditures” categories recommendation
• Which categories surprised you the most?
• What may be the most challenging category for you to
budget as you prepare to budget your money?

42. A Month In A Life!
• Standard –Planning &
Money Management
• Students will be able to
• Using research from local
sources, create a monthly
personal budget.
In this lesson you will:
Cite textual evidence from findings
and accurately estimate household
living expenses, taxes, potential
savings, and an emergency fund
Take this time to research
and learn more about
your new home for the
next month
Visit the cities Chamber of
Commerce
• Company to work for
• Research your career
• Home/apartment
View the examples in the
project folder