Financial Literacy

Financial Literacy

The “art” of knowing how to handle your money wisely

Budgeting

A plan that helps you manage your money. Can help with overspending, debt, or simply running out of money

What does it mean to prioritize your expenses?

Recognizing what is most important in your finances/budget

Income

Money you earn or receive from a source

Expense

Money spent on food, clothes, bills, etc

What is debt?

Money owed to someone else

What can debt do?

Cause interest and damage credit score

Best way to allocate after tax funds

50/30/20

50%

Percentage spend on needs

30%

Percentage spent on wants

20%

Percentage sent to savings

Needs

Bills, food, gas, anything essential

Wants

Clothes, fast food, vacation, anything nonessential

Needs Equation

(Income) x (0.5)

Wants Equation

(Income) x (0.3)

Savings

(Income) x (0.2)

Ways to increase income

• Log more hours at work

• Sell things

• Put spare cash in bank

• Find extra job

Fixed Expense

Same every month (or a period of time), hard to change, typically involves bills and insurance

Variable Expense

Varies month to month, is something you have control over