Notes

Unit 3 Lesson 1
Vocab
Budget – A written plan for spending and saving based on estimated income and expenses.
•Emergency Fund - Money put aside in savings for unexpected events.
•Fixed Expenses - Expenses that are a specific amount and are usually paid on a regular basis.
•Goals - What you want to achieve. In this lesson, you will be referring to financial goals (A plan that will help define short, medium, and long-term spending habits.)
•Gross Income - The total amount of money earned before taxes are withheld.
•Net Income - Also called take-home pay; it is the amount of money left after all taxes have been taken out.
•Opportunity Costs - All the other things given up when you choose to spend your money on one thing instead of another.
•Variable Expenses - Expenses that change in amount each month. They may also be called flexible expenses.



Follow these five simple steps to make a monthly budget for yourself.
1.Determine your goals.
2.Record your income.
3.Keep track of your expenses.
4.Develop your budget.
5.Revise.

1.Short-Term: These goals can be achieved in less than six months. Saving for new clothes would be an example of a short-term goal.
2.Medium-Term: These goals can be achieved in six months to one year. An example would be saving for a vacation.
3.Long-Term: These goals take over a year to achieve. Paying for college and saving for retirement would go here.

There are two types of expenses, fixed and variable.
•Fixed expenses are required expenses, typically for the same amount each month, and paid on a regular basis.
•Variable expenses are more difficult to budget for because the amount you spend in these categories usually changes each month, and they may not even be paid each month.

You will need to revise your budget if:
•You get a pay raise.
•You get a pay cut.
•You buy a car.
•You go to college.
•You get married.
•You get divorced.
•You have a child.
•Your child moves out on his or her own.
•You buy a car on credit and will make payments.