{"id":2579,"date":"2020-08-25T20:41:06","date_gmt":"2020-08-25T20:41:06","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-financialaccounting\/?post_type=chapter&#038;p=2579"},"modified":"2020-11-22T19:40:35","modified_gmt":"2020-11-22T19:40:35","slug":"budgeting-personal-finances","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/chapter\/budgeting-personal-finances\/","title":{"raw":"Budgeting Personal Finances","rendered":"Budgeting Personal Finances"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Create and follow a family budget<\/li>\r\n \t<li>Identify proper ways to use and manage credit<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Budgeting and Managing Your Spending<\/h2>\r\nSaving money is just as important as not running out of money. Unless you have an almost unlimited supply of money, the only way to get a handle on your spending is to have a budget and stick to it.\r\n\r\nYou create a budget by looking at your income and your expenses and making sure that at the end of your pay period, you have enough to cover everything. If the numbers don\u2019t line up\u2014in other words, if you spend more than you make\u2014that\u2019s when you need to budget and work to manage your spending. You do this by cutting down expenses in some areas (such as dining out or entertainment) so you \u201cmake ends meet\u201d each month, and hopefully have something left for savings.\r\n\r\nhttps:\/\/youtu.be\/pR756OEsKi8\r\n\r\nOne way to organize your budget is to allocate funds to fixed expenses like rent and car payment first, and then to have another section for discretionary spending, like eating out and entertainment.\r\n\r\nAnother budgeting technique is the 50\/30\/20 rule. It involves dividing your monthly income into three \u201dbuckets\u201d:\r\n<ul>\r\n \t<li style=\"font-weight: 400\">50% (or less) goes to necessities such as housing, student loans, and utilities. These are expenses you have to pay every month.<\/li>\r\n \t<li style=\"font-weight: 400\">30% (or less) goes to nice-to-haves, such as entertainment, hobbies, and travel.<\/li>\r\n \t<li style=\"font-weight: 400\">20% (or more, if possible) goes toward savings and paying down debt.<\/li>\r\n<\/ul>\r\nBudgeting won\u2019t do you any good if you don\u2019t monitor your actual spending against your budget and then make adjustments to your spending habits as needed. There are some online budgeting resources and apps, but the simplest way to track your budget may be a spreadsheet.\r\n\r\nAlso, don\u2019t forget to budget in saving for emergencies, such as temporary job loss. While it can be a hard goal to reach, it's recommended to try saving up at least two full month\u2019s worth of expenses in a savings account that is for that purpose only. Set up a separate savings account for things like luxury purchases, vacations, appliance replacement, and other large, non-recurring items.\r\n<div class=\"textbox examples\">\r\n<h3>Simple Example Budget<\/h3>\r\nHere\u2019s an example of a simple budget that tracks actual spending by month, helping to both create the ongoing budget and monitor spending against the budget and projected balances in savings and checking. On a spreadsheet, the budget could be extended out for a full year or more, giving you both history and projected balances, as well as how you actually spend your money (but you have to keep it updated).\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement\"><caption>Example Budget<\/caption>\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Category<\/th>\r\n<th scope=\"col\">January: Actual<\/th>\r\n<th scope=\"col\">February: Actual<\/th>\r\n<th scope=\"col\">March: Budgeted<\/th>\r\n<th scope=\"col\">April: Budgeted<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Gross Pay<\/th>\r\n<td class=\"r\">$ 3,500.00<\/td>\r\n<td class=\"r\">$ 3,500.00<\/td>\r\n<td class=\"r\">$ 3,500.00<\/td>\r\n<td class=\"r\">$ 3,500.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">FICA<\/th>\r\n<td class=\"r\">(261.55)<\/td>\r\n<td class=\"r\">(260.00)<\/td>\r\n<td class=\"r\">(260.00)<\/td>\r\n<td class=\"r\">(260.00)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Health ins<\/th>\r\n<td class=\"r\">(293.00)<\/td>\r\n<td class=\"r\">(300.00)<\/td>\r\n<td class=\"r\">(300.00)<\/td>\r\n<td class=\"r\">(300.00)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Fed Income tax withheld<\/th>\r\n<td class=\"r\">(215.00)<\/td>\r\n<td class=\"r\">(250.00)<\/td>\r\n<td class=\"r\">(250.00)<\/td>\r\n<td class=\"r\">(250.00)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Retirement<\/th>\r\n<td class=\"r\">(105.00)<\/td>\r\n<td class=\"r\">(200.00)<\/td>\r\n<td class=\"r\">(200.00)<\/td>\r\n<td class=\"r\">(200.00)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Take home pay<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,625.45<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,490.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,490.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,490.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Rent<\/th>\r\n<td class=\"r\">$ 850.00<\/td>\r\n<td class=\"r\">$ 850.00<\/td>\r\n<td class=\"r\">$ 850.00<\/td>\r\n<td class=\"r\">$ 850.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Medical<\/th>\r\n<td class=\"r\">25.44<\/td>\r\n<td class=\"r\">-<\/td>\r\n<td class=\"r\">80.00<\/td>\r\n<td class=\"r\">80.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Groceries<\/th>\r\n<td class=\"r\">398.50<\/td>\r\n<td class=\"r\">698.55<\/td>\r\n<td class=\"r\">350.00<\/td>\r\n<td class=\"r\">350.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Household<\/th>\r\n<td class=\"r\">255.55<\/td>\r\n<td class=\"r\">152.08<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Dining and entertainment<\/th>\r\n<td class=\"r\">149.00<\/td>\r\n<td class=\"r\">422.22<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Fuel<\/th>\r\n<td class=\"r\">45.68<\/td>\r\n<td class=\"r\">68.90<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Insurance<\/th>\r\n<td class=\"r\">121.48<\/td>\r\n<td class=\"r\">121.48<\/td>\r\n<td class=\"r\">120.00<\/td>\r\n<td class=\"r\">120.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Phone<\/th>\r\n<td class=\"r\">99.00<\/td>\r\n<td class=\"r\">99.00<\/td>\r\n<td class=\"r\">90.00<\/td>\r\n<td class=\"r\">90.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Utilities<\/th>\r\n<td class=\"r\">97.97<\/td>\r\n<td class=\"r\">112.66<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<td class=\"r\">100.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Pet\/Vet<\/th>\r\n<td class=\"r\">71.99<\/td>\r\n<td class=\"r\">71.99<\/td>\r\n<td class=\"r\">70.00<\/td>\r\n<td class=\"r\">70.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Total Expenses<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,114.61<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,596.88<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,960.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,960.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cash left over for debt payments<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>510.84<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>(106.88)<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>530.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>530.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Car payment<\/th>\r\n<td class=\"r\">(265.00)<\/td>\r\n<td class=\"r\">(265.00)<\/td>\r\n<td class=\"r\">(265.00)<\/td>\r\n<td class=\"r\">(265.00)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Student loans<\/th>\r\n<td class=\"r\">(210.00)<\/td>\r\n<td class=\"r\">(210.00)<\/td>\r\n<td class=\"r\">(210.00)<\/td>\r\n<td class=\"r\">(210.00)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Increase\/(decrease) in cash<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 35.84<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ (581.88)<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 55.00<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 55.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cash on hand, BOM<\/th>\r\n<td class=\"r\">2,115.58<\/td>\r\n<td class=\"r\">2,151.42<\/td>\r\n<td class=\"r\">1,569.54<\/td>\r\n<td class=\"r\">1,624.54<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cash on hand, end of month<\/th>\r\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,151.42<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,569.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,624.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,679.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Account balances, end of month<\/th>\r\n<td class=\"r\">Actual<\/td>\r\n<td class=\"r\">Actual<\/td>\r\n<td class=\"r\">Projected<\/td>\r\n<td class=\"r\">Projected<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Checking<\/th>\r\n<td class=\"r\">2,088.20<\/td>\r\n<td class=\"r\">1,506.32<\/td>\r\n<td class=\"r\">1,561.32<\/td>\r\n<td class=\"r\">1,616.32<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Savings<\/th>\r\n<td class=\"r\">63.22<\/td>\r\n<td class=\"r\">63.22<\/td>\r\n<td class=\"r\">63.22<\/td>\r\n<td class=\"r\">63.22<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Combined Checking and Savings<\/th>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,151.42<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,569.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,624.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,679.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<\/div>\r\nMost people like to know how much money they currently have, which means they check it on a regular basis. While you are doing that, take a few extra minutes to verify charges and to update your budget. You can do that daily or weekly, but at the very least you should do it monthly.\r\n\r\nIt doesn\u2019t matter what system you use, as long as it works for you. The test will be how much your savings account increases over time\u2014and how much your debt decreases. If you are getting further in debt, or if your savings is dwindling, you\u2019ll need to get more serious about your budgeting and find a better tool. If you are already deep in debt, you\u2019ll have to take that into account when you build, update, and monitor your budget.\r\n<div class=\"textbox tryit\">\r\n<h3>PRactice Question:\u00a0Budgeting and Saving<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/23320\r\n\r\n<\/div>\r\n<h2>Credit<\/h2>\r\nEstablishing and building up good credit over time is an important element of sound financial health. If you travel, you\u2019ll need a valid credit card to make a room reservation, and if you are on the road and a tire goes flat in the middle of the night, you might need a credit card to get a tow and pay for a new tire.\r\n\r\nThe most common ways to establish credit are to apply for a credit card and\/or a car loan. But beware, you have to make all the payments on time, or you\u2019ll be in worse shape than you would have been without those loans.\r\n\r\nhttps:\/\/youtu.be\/yDJ8r5ilpHU\r\n<h3>Avoiding Credit Trouble<\/h3>\r\nThe only thing easier than building credit is mismanaging it and getting in trouble.\u00a0According to a recent report by the Federal Reserve, Americans owe nearly $1 trillion in credit card debt, and the past-due amount is rising, especially among young people.\r\n\r\nCertainly, having a bad credit rating is a bad thing, but the flipside is that having a good credit rating is a good thing. Someday you may want to buy a house, start a small business, or even buy some income-producing real estate, and you\u2019ll want to have established credit to do that.\r\n\r\nFor credit cards, the best practice is to pay off the balance every month. Don\u2019t use them to buy something you can\u2019t afford. Especially for new borrowers, interest rates on new accounts can be upward of 25%, which means if you run up your balance to $1,000 and only make minimum payments, it could take you years to pay off the debt and the interest you end up paying could easily end up being even more than the original purchase.\r\n\r\nIf you are already in over your head, you\u2019ll first have to make some hard budget decisions to free up money to pay down your loans. Most people who have successfully paid down debt use the \u201csnowball\u201d method, where you pay down the smallest outstanding balance first, and then use the money freed up from paying off that debt, plus the extra money you freed up in the first place, to pay down the next lowest balance, and so on, until you are out of debt. Another way is to attack the highest interest rates, paying those off first to save money in the long run. Either way, once your credit cards are paid off, be careful in your spending so you don\u2019t run up the balances again for unneeded expenses.\r\n<h3>Credit Scores<\/h3>\r\nA credit score is a three-digit number, typically ranging from 300 to 850, that is the result of an analysis of your credit file. It gives lenders an indication of your potential credit risk and ability to repay loans. Credit scores consider various factors from your current and past credit accounts, such as payment history, length of credit history, and total credit available.\r\n\r\nCredit scores are generally classified as:\r\n<ul>\r\n \t<li><strong>Very poor:<\/strong> 300\u2013579<\/li>\r\n \t<li><strong>Fair:<\/strong> 580\u2013669<\/li>\r\n \t<li><strong>Good:<\/strong> 670\u2013739<\/li>\r\n \t<li><strong>Very good:<\/strong> 740\u2013799<\/li>\r\n \t<li><strong>Exceptional:<\/strong> 800\u2013850<\/li>\r\n<\/ul>\r\nA higher credit score means you are more likely to qualify for a loan with a lower interest rate.\r\n\r\nThe simple act of checking your credit score is one way you can improve your credit. If you notice a dip in your score, it may alert you to potential fraud or errors on your report. Checking your score monthly may help you catch issues early and get a head start on resolving them. You can check your scores through the major credit reporting agencies and through some financial advisor sites.\r\n<div class=\"textbox key-takeaways\">\r\n<h3>Additional Resources<\/h3>\r\nCheck out the <a href=\"https:\/\/www.consumer.ftc.gov\/articles\/0155-free-credit-reports\" target=\"_blank\" rel=\"noopener\">Federal Trade Commission website<\/a>\u00a0for more resources.\r\n\r\n<\/div>\r\n<div class=\"textbox examples\">\r\n<h3>Impact of Interest Rate<\/h3>\r\nHere\u2019s an example of how the interest rate can affect your overall purchase (rates are determined by lenders and the market\u2014these are for illustrative purposes only):\r\n<ul>\r\n \t<li>$10,000 car loan, poor credit rating, 10% interest, 60 months: payment = $212\r\n<ul>\r\n \t<li>Total amount paid back, including interest = $12,748<\/li>\r\n<\/ul>\r\n<\/li>\r\n \t<li>$10,000 car loan, very good credit rating, 3% interest, 60 months: payment = $180\r\n<ul>\r\n \t<li>Total amount paid back, including interest = $10,781<\/li>\r\n \t<li>Total savings just from having a good credit rating: $1,967<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\nAlso, just for comparison purposes, if you have a high interest (23.99%) credit card with a $10,000 balance and you make minimum payments of $210 per month, it would take you 13 years to pay it off and the total payments would be about $32,000. Double the payment to $420, and you will have it paid off in just under 3 years, and the total principal plus interest will be less than $14,000.\r\n\r\n<\/div>\r\n<div class=\"textbox key-takeaways\">\r\n<h3>One last note on credit<\/h3>\r\nSometimes credit can get the best of you, and the total amount you owe becomes overwhelming, and you\u2019ll never be able to pay it off. If this becomes the case, the government allows you to file for bankruptcy, which is a legal process that discharges all eligible debt. The kinds of debt that aren\u2019t usually discharged during a bankruptcy include student loans, back taxes, and child support.\r\n\r\nHowever, bankruptcy leaves a deep scar on your credit history for many years. It\u2019s a last resort. It's better not to ever get that deep in debt in the first place, which means planning, good money management, meticulous budgeting, and spending discipline.\r\n\r\n<\/div>\r\n<div class=\"textbox tryit\">\r\n<h3>PRactice Question:\u00a0Credit and Finance<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/23321\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Create and follow a family budget<\/li>\n<li>Identify proper ways to use and manage credit<\/li>\n<\/ul>\n<\/div>\n<h2>Budgeting and Managing Your Spending<\/h2>\n<p>Saving money is just as important as not running out of money. Unless you have an almost unlimited supply of money, the only way to get a handle on your spending is to have a budget and stick to it.<\/p>\n<p>You create a budget by looking at your income and your expenses and making sure that at the end of your pay period, you have enough to cover everything. If the numbers don\u2019t line up\u2014in other words, if you spend more than you make\u2014that\u2019s when you need to budget and work to manage your spending. You do this by cutting down expenses in some areas (such as dining out or entertainment) so you \u201cmake ends meet\u201d each month, and hopefully have something left for savings.<\/p>\n<p><iframe loading=\"lazy\" id=\"oembed-1\" title=\"Consultant | My budget &amp; planning for the future | Part 3 | Khan Academy\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/pR756OEsKi8?feature=oembed&#38;rel=0\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>One way to organize your budget is to allocate funds to fixed expenses like rent and car payment first, and then to have another section for discretionary spending, like eating out and entertainment.<\/p>\n<p>Another budgeting technique is the 50\/30\/20 rule. It involves dividing your monthly income into three \u201dbuckets\u201d:<\/p>\n<ul>\n<li style=\"font-weight: 400\">50% (or less) goes to necessities such as housing, student loans, and utilities. These are expenses you have to pay every month.<\/li>\n<li style=\"font-weight: 400\">30% (or less) goes to nice-to-haves, such as entertainment, hobbies, and travel.<\/li>\n<li style=\"font-weight: 400\">20% (or more, if possible) goes toward savings and paying down debt.<\/li>\n<\/ul>\n<p>Budgeting won\u2019t do you any good if you don\u2019t monitor your actual spending against your budget and then make adjustments to your spending habits as needed. There are some online budgeting resources and apps, but the simplest way to track your budget may be a spreadsheet.<\/p>\n<p>Also, don\u2019t forget to budget in saving for emergencies, such as temporary job loss. While it can be a hard goal to reach, it&#8217;s recommended to try saving up at least two full month\u2019s worth of expenses in a savings account that is for that purpose only. Set up a separate savings account for things like luxury purchases, vacations, appliance replacement, and other large, non-recurring items.<\/p>\n<div class=\"textbox examples\">\n<h3>Simple Example Budget<\/h3>\n<p>Here\u2019s an example of a simple budget that tracks actual spending by month, helping to both create the ongoing budget and monitor spending against the budget and projected balances in savings and checking. On a spreadsheet, the budget could be extended out for a full year or more, giving you both history and projected balances, as well as how you actually spend your money (but you have to keep it updated).<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement\">\n<caption>Example Budget<\/caption>\n<thead>\n<tr>\n<th scope=\"col\">Category<\/th>\n<th scope=\"col\">January: Actual<\/th>\n<th scope=\"col\">February: Actual<\/th>\n<th scope=\"col\">March: Budgeted<\/th>\n<th scope=\"col\">April: Budgeted<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Gross Pay<\/th>\n<td class=\"r\">$ 3,500.00<\/td>\n<td class=\"r\">$ 3,500.00<\/td>\n<td class=\"r\">$ 3,500.00<\/td>\n<td class=\"r\">$ 3,500.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">FICA<\/th>\n<td class=\"r\">(261.55)<\/td>\n<td class=\"r\">(260.00)<\/td>\n<td class=\"r\">(260.00)<\/td>\n<td class=\"r\">(260.00)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Health ins<\/th>\n<td class=\"r\">(293.00)<\/td>\n<td class=\"r\">(300.00)<\/td>\n<td class=\"r\">(300.00)<\/td>\n<td class=\"r\">(300.00)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Fed Income tax withheld<\/th>\n<td class=\"r\">(215.00)<\/td>\n<td class=\"r\">(250.00)<\/td>\n<td class=\"r\">(250.00)<\/td>\n<td class=\"r\">(250.00)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Retirement<\/th>\n<td class=\"r\">(105.00)<\/td>\n<td class=\"r\">(200.00)<\/td>\n<td class=\"r\">(200.00)<\/td>\n<td class=\"r\">(200.00)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Take home pay<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,625.45<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,490.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,490.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,490.00<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Rent<\/th>\n<td class=\"r\">$ 850.00<\/td>\n<td class=\"r\">$ 850.00<\/td>\n<td class=\"r\">$ 850.00<\/td>\n<td class=\"r\">$ 850.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Medical<\/th>\n<td class=\"r\">25.44<\/td>\n<td class=\"r\">&#8211;<\/td>\n<td class=\"r\">80.00<\/td>\n<td class=\"r\">80.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Groceries<\/th>\n<td class=\"r\">398.50<\/td>\n<td class=\"r\">698.55<\/td>\n<td class=\"r\">350.00<\/td>\n<td class=\"r\">350.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Household<\/th>\n<td class=\"r\">255.55<\/td>\n<td class=\"r\">152.08<\/td>\n<td class=\"r\">100.00<\/td>\n<td class=\"r\">100.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Dining and entertainment<\/th>\n<td class=\"r\">149.00<\/td>\n<td class=\"r\">422.22<\/td>\n<td class=\"r\">100.00<\/td>\n<td class=\"r\">100.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Fuel<\/th>\n<td class=\"r\">45.68<\/td>\n<td class=\"r\">68.90<\/td>\n<td class=\"r\">100.00<\/td>\n<td class=\"r\">100.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Insurance<\/th>\n<td class=\"r\">121.48<\/td>\n<td class=\"r\">121.48<\/td>\n<td class=\"r\">120.00<\/td>\n<td class=\"r\">120.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Phone<\/th>\n<td class=\"r\">99.00<\/td>\n<td class=\"r\">99.00<\/td>\n<td class=\"r\">90.00<\/td>\n<td class=\"r\">90.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Utilities<\/th>\n<td class=\"r\">97.97<\/td>\n<td class=\"r\">112.66<\/td>\n<td class=\"r\">100.00<\/td>\n<td class=\"r\">100.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Pet\/Vet<\/th>\n<td class=\"r\">71.99<\/td>\n<td class=\"r\">71.99<\/td>\n<td class=\"r\">70.00<\/td>\n<td class=\"r\">70.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Total Expenses<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,114.61<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,596.88<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,960.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,960.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cash left over for debt payments<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>510.84<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>(106.88)<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>530.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>530.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Car payment<\/th>\n<td class=\"r\">(265.00)<\/td>\n<td class=\"r\">(265.00)<\/td>\n<td class=\"r\">(265.00)<\/td>\n<td class=\"r\">(265.00)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Student loans<\/th>\n<td class=\"r\">(210.00)<\/td>\n<td class=\"r\">(210.00)<\/td>\n<td class=\"r\">(210.00)<\/td>\n<td class=\"r\">(210.00)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Increase\/(decrease) in cash<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 35.84<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ (581.88)<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 55.00<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 55.00<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cash on hand, BOM<\/th>\n<td class=\"r\">2,115.58<\/td>\n<td class=\"r\">2,151.42<\/td>\n<td class=\"r\">1,569.54<\/td>\n<td class=\"r\">1,624.54<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cash on hand, end of month<\/th>\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,151.42<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,569.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,624.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<td class=\"r line-double line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,679.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Account balances, end of month<\/th>\n<td class=\"r\">Actual<\/td>\n<td class=\"r\">Actual<\/td>\n<td class=\"r\">Projected<\/td>\n<td class=\"r\">Projected<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Checking<\/th>\n<td class=\"r\">2,088.20<\/td>\n<td class=\"r\">1,506.32<\/td>\n<td class=\"r\">1,561.32<\/td>\n<td class=\"r\">1,616.32<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Savings<\/th>\n<td class=\"r\">63.22<\/td>\n<td class=\"r\">63.22<\/td>\n<td class=\"r\">63.22<\/td>\n<td class=\"r\">63.22<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Combined Checking and Savings<\/th>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 2,151.42<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,569.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,624.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1,679.54<span class=\"u-sr-only\">Double Line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<p>Most people like to know how much money they currently have, which means they check it on a regular basis. While you are doing that, take a few extra minutes to verify charges and to update your budget. You can do that daily or weekly, but at the very least you should do it monthly.<\/p>\n<p>It doesn\u2019t matter what system you use, as long as it works for you. The test will be how much your savings account increases over time\u2014and how much your debt decreases. If you are getting further in debt, or if your savings is dwindling, you\u2019ll need to get more serious about your budgeting and find a better tool. If you are already deep in debt, you\u2019ll have to take that into account when you build, update, and monitor your budget.<\/p>\n<div class=\"textbox tryit\">\n<h3>PRactice Question:\u00a0Budgeting and Saving<\/h3>\n<p>\t<iframe id=\"lumen_assessment_23320\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=23320&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_23320\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<h2>Credit<\/h2>\n<p>Establishing and building up good credit over time is an important element of sound financial health. If you travel, you\u2019ll need a valid credit card to make a room reservation, and if you are on the road and a tire goes flat in the middle of the night, you might need a credit card to get a tow and pay for a new tire.<\/p>\n<p>The most common ways to establish credit are to apply for a credit card and\/or a car loan. But beware, you have to make all the payments on time, or you\u2019ll be in worse shape than you would have been without those loans.<\/p>\n<p><iframe loading=\"lazy\" id=\"oembed-2\" title=\"The 5 Strategies That Raised My Credit Score From The 500s to The 800s\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/yDJ8r5ilpHU?feature=oembed&#38;rel=0\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h3>Avoiding Credit Trouble<\/h3>\n<p>The only thing easier than building credit is mismanaging it and getting in trouble.\u00a0According to a recent report by the Federal Reserve, Americans owe nearly $1 trillion in credit card debt, and the past-due amount is rising, especially among young people.<\/p>\n<p>Certainly, having a bad credit rating is a bad thing, but the flipside is that having a good credit rating is a good thing. Someday you may want to buy a house, start a small business, or even buy some income-producing real estate, and you\u2019ll want to have established credit to do that.<\/p>\n<p>For credit cards, the best practice is to pay off the balance every month. Don\u2019t use them to buy something you can\u2019t afford. Especially for new borrowers, interest rates on new accounts can be upward of 25%, which means if you run up your balance to $1,000 and only make minimum payments, it could take you years to pay off the debt and the interest you end up paying could easily end up being even more than the original purchase.<\/p>\n<p>If you are already in over your head, you\u2019ll first have to make some hard budget decisions to free up money to pay down your loans. Most people who have successfully paid down debt use the \u201csnowball\u201d method, where you pay down the smallest outstanding balance first, and then use the money freed up from paying off that debt, plus the extra money you freed up in the first place, to pay down the next lowest balance, and so on, until you are out of debt. Another way is to attack the highest interest rates, paying those off first to save money in the long run. Either way, once your credit cards are paid off, be careful in your spending so you don\u2019t run up the balances again for unneeded expenses.<\/p>\n<h3>Credit Scores<\/h3>\n<p>A credit score is a three-digit number, typically ranging from 300 to 850, that is the result of an analysis of your credit file. It gives lenders an indication of your potential credit risk and ability to repay loans. Credit scores consider various factors from your current and past credit accounts, such as payment history, length of credit history, and total credit available.<\/p>\n<p>Credit scores are generally classified as:<\/p>\n<ul>\n<li><strong>Very poor:<\/strong> 300\u2013579<\/li>\n<li><strong>Fair:<\/strong> 580\u2013669<\/li>\n<li><strong>Good:<\/strong> 670\u2013739<\/li>\n<li><strong>Very good:<\/strong> 740\u2013799<\/li>\n<li><strong>Exceptional:<\/strong> 800\u2013850<\/li>\n<\/ul>\n<p>A higher credit score means you are more likely to qualify for a loan with a lower interest rate.<\/p>\n<p>The simple act of checking your credit score is one way you can improve your credit. If you notice a dip in your score, it may alert you to potential fraud or errors on your report. Checking your score monthly may help you catch issues early and get a head start on resolving them. You can check your scores through the major credit reporting agencies and through some financial advisor sites.<\/p>\n<div class=\"textbox key-takeaways\">\n<h3>Additional Resources<\/h3>\n<p>Check out the <a href=\"https:\/\/www.consumer.ftc.gov\/articles\/0155-free-credit-reports\" target=\"_blank\" rel=\"noopener\">Federal Trade Commission website<\/a>\u00a0for more resources.<\/p>\n<\/div>\n<div class=\"textbox examples\">\n<h3>Impact of Interest Rate<\/h3>\n<p>Here\u2019s an example of how the interest rate can affect your overall purchase (rates are determined by lenders and the market\u2014these are for illustrative purposes only):<\/p>\n<ul>\n<li>$10,000 car loan, poor credit rating, 10% interest, 60 months: payment = $212\n<ul>\n<li>Total amount paid back, including interest = $12,748<\/li>\n<\/ul>\n<\/li>\n<li>$10,000 car loan, very good credit rating, 3% interest, 60 months: payment = $180\n<ul>\n<li>Total amount paid back, including interest = $10,781<\/li>\n<li>Total savings just from having a good credit rating: $1,967<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>Also, just for comparison purposes, if you have a high interest (23.99%) credit card with a $10,000 balance and you make minimum payments of $210 per month, it would take you 13 years to pay it off and the total payments would be about $32,000. Double the payment to $420, and you will have it paid off in just under 3 years, and the total principal plus interest will be less than $14,000.<\/p>\n<\/div>\n<div class=\"textbox key-takeaways\">\n<h3>One last note on credit<\/h3>\n<p>Sometimes credit can get the best of you, and the total amount you owe becomes overwhelming, and you\u2019ll never be able to pay it off. If this becomes the case, the government allows you to file for bankruptcy, which is a legal process that discharges all eligible debt. The kinds of debt that aren\u2019t usually discharged during a bankruptcy include student loans, back taxes, and child support.<\/p>\n<p>However, bankruptcy leaves a deep scar on your credit history for many years. It\u2019s a last resort. It&#8217;s better not to ever get that deep in debt in the first place, which means planning, good money management, meticulous budgeting, and spending discipline.<\/p>\n<\/div>\n<div class=\"textbox tryit\">\n<h3>PRactice Question:\u00a0Credit and Finance<\/h3>\n<p>\t<iframe id=\"lumen_assessment_23321\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=23321&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_23321\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-2579\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Budgeting and Saving. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Consultant | My budget &amp; planning for the future. <strong>Authored by<\/strong>: Khan Academy. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/pR756OEsKi8\">https:\/\/youtu.be\/pR756OEsKi8<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><li>The 5 Strategies That Raised My Credit Score From The 500s to The 800s. <strong>Authored by<\/strong>: The Financial Diet. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=yDJ8r5ilpHU&#038;feature=emb_logo\">https:\/\/www.youtube.com\/watch?v=yDJ8r5ilpHU&#038;feature=emb_logo<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: https:\/\/pixabay.com\/service\/terms\/#license<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":17,"menu_order":7,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Budgeting and Saving\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Consultant | My budget & planning for the future\",\"author\":\"Khan Academy\",\"organization\":\"\",\"url\":\" https:\/\/youtu.be\/pR756OEsKi8\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"copyrighted_video\",\"description\":\"The 5 Strategies That Raised My Credit Score From The 500s to The 800s\",\"author\":\"The Financial Diet\",\"organization\":\"\",\"url\":\"https:\/\/www.youtube.com\/watch?v=yDJ8r5ilpHU&feature=emb_logo\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"https:\/\/pixabay.com\/service\/terms\/#license\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-2579","chapter","type-chapter","status-publish","hentry"],"part":2570,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/2579","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/users\/17"}],"version-history":[{"count":15,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/2579\/revisions"}],"predecessor-version":[{"id":6458,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/2579\/revisions\/6458"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/parts\/2570"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/2579\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/media?parent=2579"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=2579"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/contributor?post=2579"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/license?post=2579"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}