Advanced Level. EACH LESSON PLAN IS DESIGNED AND CONTINUALLY EVALUATED BY MATERIALS

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1 Page SPENDING PLANS Advanced Level RECOMMENDED GRADE LEVELS AVERAGE TIME TO COMPLETE Anticipatory Set & Facilitation: 60 minutes Conclusion/Assessment Options: minutes Time does not include optional items. EACH LESSON PLAN IS DESIGNED AND CONTINUALLY EVALUATED BY EDUCATORS, FOR EDUCATORS. THANK YOU TO THE FOLLOWING EDUCATORS FOR DEVELOPING COMPONENTS OF THIS LESSON PLAN. Kim Knoche, Family Consumer Sciences Educator, Forsyth, Montana Deani Goyette, Business Educator, Forsyth, Montana Tracey Newman, Family and Consumer Sciences Educator, Ste. Genevieve, Missouri Kathie Beck, Family and Consumer Sciences Educator, Holland, Michigan NATIONAL STANDARDS The curriculum is aligned to the following national standards: National Standards for Financial Literacy American Association of Family and Consumer Sciences Council for Economic Education National Business Education National Jump$tart Common Core English Language Arts LESSON PLAN OBJECTIVES Upon completion of this lesson, participants will be able to: Compare the differences between a statement of financial position, income and expense statement, and spending plan Analyze why it is important to create a spending plan Implement the process of developing a spending plan MATERIALS PROVIDED IN THIS LESSON PLAN The Brown Family A1 Spending Plan: Mission Home Front A2 Spending Plans A3 The Carson Family A4 My Spending Plan A5 Letter of Advice for the Brown Family Rubric B1 Spending Plans Vocabulary List E1 Spending Plan Template E2 Spending Plans Information Sheet F1 Spending Plans Note Taking Guide L1 MATERIALS MATERIALS SPECIFIC TO THIS LESSON PLAN BUT AVAILABLE AS A SEPARATE DOWNLOAD Spending Plans Answer Key C1 Spending Plan Excel Template E3 Spending Plans PowerPoint Presentation G1 Managing Your Money Unit Multiple Choice Test Bank and Answer Key M1 & C1 MATERIALS TO ACQUIRE SEPARATELY DEPENDING ON OPTIONS TAUGHT Play Dough (1/4 cup per participant) Blank paper Markers

2 Page RESOURCES EXTERNAL RESOURCES External resources referenced in this lesson plan: Free Electronic Spending Plans: Stove Top Play Dough Recipe: Free Electronic Control Systems: o Mint: o PearBudget: Applications for tracking, creating, and controlling a spending plan found in the Tablet Applications for the Personal Finance Classroom Active Learning Tool Envelope Budget System Labels: system with printableenvelopes.html Consumer Jungle student oriented website: TAKE CHARGE TODAY RESOURCES Similar lesson plan at a different level: Diving into Spending Plans Optional lesson plan resources: Vocabulary Reinforcement Activities Active Learning Tool Technology Integration Options Active Learning Tool Tablet Applications for the Personal Finance Classroom Active Learning Tool EDUCATOR MATERIALS Materials to support educators when preparing to teach this lesson plan are available on the Take Charge Today website. CONTENT PARTICIPANT READING Spending Plans Information Sheet F1 OPTIONAL INSTRUCTION This lesson is designed to be taught as a stand alone lesson. However, background content knowledge from the following lesson plans is directly related to this lesson and may be helpful for participants. Statement of Financial Position Lesson Plan Income and Expense Statement Lesson Plan Setting Financial Goals Lesson Plan LESSON FACILITATION PREPARE Visual indicators to help prepare the lesson INSTRUCT Instructions to conduct the lesson facilitation VOCABULARY ACTIVITY What is a Spending Plan Approximate time: See Anticipatory Set Materials to prepare: None 1. Vocabulary reinforcement has been built into the anticipatory set, by using play CUSTOMIZE Potential modifications to lesson facilitation Use the quiz me cards activity from the Vocabulary Reinforcement Activities Active Learning Tool

3 Page dough to begin the spending plan development process and linking it to the term spending plan. ANTICIPATORY SET Where s My Dough? Approximate time: 10 minutes Materials to prepare: Spending Plan PowerPoint Presentation G1 Sheet of blank paper and a marker per participant Distribute approximately ¼ cup of play dough per participant 1. Present the Spending Plan PowerPoint Presentation G1. Use the directions on slide 2: Where s My Dough to conduct the Where s My Dough activity: a. Provide each participant with a sheet of blank paper and a marker. b. Ask participants to create a list of their expenses on the paper. i. If needed, remind participants that expenses are usually divided into the following categories: taxes, savings and investing, insurance, housing, transportation, food, and other. c. Instruct participants to estimate how much they spend on each expense and write that down as well. d. Distribute play dough to each participant. The amount distributed does not need to be identical for each person. e. Tell the participants that the play dough represents income. f. Remind participants that similar to real life, they have a limited amount of income and discuss why. Sample discussion questions include: i. Do some individuals earn more than others? (represented by the different amounts of play dough given to each participant). ii. What circumstances can provide a person with more dough? iii. What are ways to increase one s income? g. Instruct participants to divide their play dough into sections to show how much income is spent on each expense. Label these sections on the paper. iv. Depending upon the number of expenses a participant has, they may need to divide their expenses into similar categories. For example, snacks and sports drinks can both fall under the category of food. v. Discuss the type of expenditures each person has. h. Have participants write a personal financial goal on their paper. i. After the goal has been written, ask participants, Based upon your current spending, is it realistic to achieve your goal? j. Explain to participants that they may need to make some trade offs and change the way they spend their money to reach that goal. k. Instruct participants to make any needed adjustments to their play dough in order to reach their goal and indicate the change on their paper. l. Inform participants that they have started to develop a spending plan! A spending plan helps determine what changes to make to spending to reach financial goals and live within your means. m. Throughout the remainder of the lesson they will learn about the A recipe link is provided in the supplemental resources section to make your own play dough. Show all or part of Everybody Loves Raymond episode titled The Checkbook in Season 2 Episode 16. In this episode, Raymond unsuccessfully manages the family budget and learns why it is important to have a spending plan.

4 Page spending plan development process. RECOMMENDED FACILITATION Approximate time: 50 minutes Materials to prepare: Spending Plan PowerPoint Presentation G1 1 The Brown Family A1 per participant The Spending Plan Excel Template E3 is available as an example spreadsheet Tablet Applications for the Personal Finance Classroom Active Learning Tool for reference 1. Split participants into groups of 2 4. Participants will remain in these groups for the remainder of the facilitation. 2. Continue the Spending Plan PowerPoint Presentation G1 Part 1: What is a Spending Plan and why is it important? 3. Slide 3: What is a Spending Plan? a. Discuss the definition of a spending plan. 4. Slide 4: Why is a Spending Plan an important part of financial planning? a. A spending plan is a very important part of financial planning, because helps you manage your money in a positive manner. By using a spending plan you will be able increase net worth and reach goals. b. A spending plan also helps you analyze the opportunity costs of tradeoffs to make spending decisions that make you the most happy and therefore maximize financial well being. 5. Slide 5: Money Management Tools a. The Spending Plan is the last of the three money management tools. b. The Statement of Financial Position and the Income and Expense Statement may be used to determine what changes to make to financial planning and decisions. Then, the spending plan is used to actually make those changes. c. When comparing the statement of financial position, the income and expense statement, and a spending plan, think of the differences in terms of the past, present and future. 6. Slide 6: A forward looking Income and Expense Statement a. A spending plan is a forward looking Income and Expense Statement. b. The template is very similar to an Income and Expense Statement except the column indicates the planned amount versus the past amount. In fact, some people use the same template for both the Income and Expense Statement and the Spending Plan. Part 2: Spending Plan Development Process 7. Slide 7: Spending Plan Development Process a. Creating a spending plan involves five steps. The first three steps develop the spending plan and the last two steps help maintain the spending plan. 8. Slide 8: Track Current Income and Expenses a. The first step to creating a spending plan is to determine how much The Spending Plan Note Taking Guide L1 is provided but not included as part of the recommended facilitation instructions or approximate time. Read the studentgenerated articles about spending plans on the Consumer Jungle website. Refer to the Where s My Dough anticipatory set and remind participants that they started steps 1 3 of the spending plan development process. Refer to the Income and Expense Statement Lesson Plan to review how to track income and expenses.

5 Page money you earn and what you spend your money on. b. This step is very important, because it ensures that the spending plan will be realistic. 9. Slide 9: Congratulations! a. They have been hired as a financial advisor for John and Tia Brown. b. Pass out one The Brown Family A1 to each participant. Throughout the remainder of the PowerPoint, participants will work through each step on The Brown Family A1. c. There is certain information they need to know to act as a financial advisor for the Brown family. Discuss this information. d. Their job as a financial advisor will be to create a spending plan for the Brown family. 10. Slide 10: The Brown Family Step One: Track Current Income and Expenses a. Refer participants to The Brown Family A1 and have them find the section titled Step One: Track Current Income and Expenses. b. John and Tia kept all their receipts for the month of January to create an Income and Expense Statement. c. Have participants work in their groups to review John and Tia s January Income and Expense Statement for the information for step one of the spending plan development process. 11. Slide 11: Personalize Your Spending Plan a. The most effective spending plans are those which are personalized. In the second step of the spending plan development process, three questions need to be answered in order to personalize your spending plan. 12. Slide 12: How will you create the actual spending plan? a. The first part of personalizing a spending plan is to determine how the actual spending plan will be created. b. The spending plan can be created in any written method that works for them. c. Provide examples when possible. i. The Spending Plan Excel Template E3 is available as an example spreadsheet. ii. Applications that may be used for creating a spending plan on smartphones and tablets are listed in the Tablet Applications for the Personal Finance Classroom Active Learning Tool resource. d. Ask participants to determine how they would create the actual spending plan and discuss with their group. 13. Slide 13: What is the intended time period for your spending plan? a. The next part of personalizing a spending plan includes determining the time period. b. Ask participants to determine what time period their spending plan would be for and discuss within their group. Stress that any time period is ok as long as it works for the individual. c. The final part of personalizing a spending plan includes creating personal categories for income and expenses. Categories should be created from the tracking completed in step one. 14. Slide 14: The Brown Family Step Two: Personalize Your Spending Plan A paper spending plan is provided in The Brown Family A1. If computer access is available the Spending Plan Excel Template E3 is also available to complete the Brown family spending plan. An answer key for The Brown Family A1 is located within the lesson plan answer key Spending Plans Answer Key C1.

6 Page a. Refer participants to step two of The Brown Family A1. b. John and Tia have requested that you create a spending plan for the month of February. c. Since John and Tia already created a spreadsheet for their Income and Expense, they have requested that the Spending Plan be created in the same manner. d. Have participants find the column on the Brown families Income and Expense Statement where the Spending Plan will be created for the month of February. 15. Slide 15: Allocate Money to Each Category a. The next step in the spending plan development process is to allocate money to each category. 16. Slide 16: When allocating money consider: a. When creating a spending plan you should consider these factors. b. Analyze the trade offs and opportunity costs of those trade offs to determine which spending decisions are going to make you the happiest. c. Review your goals to ensure the decisions made on your spending plan align with your goals. d. If you are reducing your expenses, consider thinking about expenses in terms of contractual versus non contractual. Contractual expenses are not easy to reduce or eliminate, because you have signed some sort of contract that requires you to pay that expense for a specific amount of time. 17. Slide 17: Spending Plan Guide a. It may help to refer to a spending guide when making decisions regarding how much to spend for each expense. The pie chart provides a guide for typical percentages of income spent in each expense category. b. Ask participants what variables may cause the spending guide to look different and discuss within their groups. Discuss how this is only a guide and percentages may change due to many factors such as where you live (cost of living), age, income, etc. 18. Slide 18: Net Gain or Net Loss? a. Once all money has been allocated in the spending plan, determine if you have a net gain or net loss by subtracting expenses from income. b. If the resulting amount is positive, you have a net gain. You can add more money to savings or another expense. c. If the resulting amount is negative, you have a net loss. You need to increase income, decrease expenses, or do a combination of both. 19. Slide 19: The Brown Family Step Three: Allocate Money to Each Category a. Refer participants the step three section of The Brown Family A1 as well as their Income and Expense Statement on the last page of The Brown Family A1. b. The couple has indicated a * next to expenses that are either contractual or they are unwilling to decrease (they can be increased). Therefore, these expenses cannot change from the amount on the Income and Expense Statement. Make sure participants find the * s on the Income and Expense Statement.

7 Page c. Remind participants to consider the goals John and Tia identified when creating their Spending Plan, and also consider the trade offs they will have to make due to the changes indicated in the Spending Plan. 20. Slide 20: The Brown Family Step Three: Allocate Money to Each Category a. Refer participants to the Planned Amount for February column of the Brown Family s Income and Expense Statement on The Brown Family A1. b. Have participants use this column to create a Spending Plan for John and Tia. c. When everyone has completed the Spending Plan for John and Tia for the month of February, have participants discuss the changes made with their groups. d. Then, have participants explain each change that they made in the space provided in step three of The Brown Family A1. e. Then, have participants re write John and Tia s goals into SMART goals using the new spending plan in the space provided in step three of The Brown Family A1 21. Slide 21: Implement and Control a. Once you have created your spending plan, ensure that you make those planned spending decisions. This is the hardest part of the spending plan process for most. b. There are many types of control systems available to help you monitor your spending. 22. Slide 22: Control Systems a. Discuss the different types of control systems. b. Provide examples when possible. i. Sample Internet based control systems are available in the supplemental resources section. c. Ask participants to determine which control system would work best for them and share within their groups. Stress that many options are available, use what is best for you. 23. Slide 23: The Brown Family Step Four: Implement and Control a. Refer to step four of The Brown Family A1 and have participants explain what control system they would recommend for John and Tia based upon the information they know about the couple. b. Discuss the answers within their groups. 24. Slide 24: Evaluate and Make Adjustments a. After implementing your spending plan, you aren t quite done. The last step is to evaluate how well your spending plan worked and make any necessary adjustments. 25. Slide 25: The Brown Family a. Refer participants to step five of The Brown Family A1. b. John and Tia have evaluated their spending plan and realized that they should increase the amount of their grocery budget by $ c. Have participants make this adjustment, ensuring that the spending plan still has a net gain or zero balance. d. Refer to step five of The Brown Family A1 and have participants answer the final question: How has developing a spending plan helped the Brown family? Teach the Setting Financial Goals Lesson Plan to learn the SMART goal process.

8 Page e. Now that they know about spending plans, ask participants to determine how creating a spending plan could help them now and in the future. 26. Slide 26: Summary CONCLUSION OPTIONS There are two conclusion options provided for this lesson. 1. Option 1: Letter of Advice for the Brown Family 2. Option 2: Interview Option 1: Letter of Advice for the Brown Family Approximate time: 45 minutes Materials to prepare: 1 Letter of Advice for the Brown Family Rubric B1 per participant 1. Extend the Brown Family Scenario. Have participants write a letter to John and Tia as their financial advisor. Refer to the Letter of Advice for the Brown Family Rubric B1 for instructions. Option 2: Interview Approximate time: 15 minutes if reflection questions and a discussion are completed in class. Time outside of class will be needed to complete the interview. Materials to prepare: 1 Spending Plan: Mission Home Front A2 per participant 1. Have participants interview an adult using Spending Plan: Mission Home Front A2 and then answer the reflection questions. a. Remind participants to ask follow up questions if necessary to go beyond yes or no responses. 2. Have an in class discussion regarding what was learned from the interviews. Have participants work in teams and act out a meeting between the Brown family and the financial advisor(s). The financial advisor(s) can provide the family with the same advice outlined in the letter. Create a video of the meeting. Use a brainstorming/ discussion Web 2.0 tool to collect anonymous responses to the interview questions to complete the in class discussion. Refer to the Technology Integration Options Active Learning Tool guide. Expand upon reflection question 3 by discussing the importance of clear communication with spouses and/or family members when making spending decisions. ASSESSMENT OPTIONS There are three assessment options provided for this lesson. Option 1: Reinforcement Worksheet Option 2: Scenario The Carson Family Option 3: My Spending Plan

9 Page Option 1: Reinforcement Worksheet Approximate time: 20 minutes Materials to prepare: 1 Spending Plans A3 per participant 1. Complete Spending Plans A3 as directed. Option 2: Scenario The Carson Family Approximate time: 45 minutes Materials to prepare: 1 The Carson Family A4 per participant 1. Complete The Carson Family A4 individually or in small groups Have participants write a letter of advice to the Carson family similar to the letter of advice for the Brown Family. Option 3: My Spending Plan Approximate time: 45 minutes Materials to prepare: 1 My Spending Plan A5 per participant Spending Plan Template E2 or Spending Plan Excel Template E3 per participant 1. Have participants create a Spending Plan for themselves using the My Spending Plan A5. a. If the My Income and Expense Statement A4 assessment from the Income and Expense Statement Lesson Plan was completed, use the completed statement to conduct this assignment. If the My Income and Expense Statement A4 assessment was not completed, consider completing that assignment before the My Spending Plan A5. The assignment will take more time if the My Income and Expense Statement A4 assessment has not been completed. b. Two templates are provided to create the Spending Plan: Spending Plan Template E2 to complete by hand, and a Microsoft Excel template Spending Plan Excel Template E3 to create electronically.

10 Page E1 Spending Plans Vocabulary List TERM DEFINITION 1 Spending plan An income and expense statement sometimes referred to as a budget which records both planned and actual income and expenses over a period of time

11 Page L1 Spending Plans Note Taking Guide Total Points Earned Total Points Possible Percentage Name Date Class Directions: Use the prompts provided to help you take notes during the lesson. The Spending Plan What is a Spending Plan? Draw a line to match each money management tool with the appropriate time frame. Statement of Financial Position Income and Expense Statement Spending Plan Past Future Today Why is a Spending Plan an important part of financial planning? The Spending Plan Development Process Step 5: Evaluate and Make Adjustments Step 1 Track Current Income and Expenses Circle the steps in the spending plan development process that develop a spending plan. Step 4 Implement and Control Step 3 Allocate Money to Each Category Step 2 Personalize Your Spending Plan Place a square around the steps in the spending plan development process that maintain a spending plan.

12 Page L1 1 By creating an Income and Expense Statement, you have already tracked income and expenses. Why is tracking income and expenses an important part of creating a Spending Plan? 2 How will you develop a Spending Plan? What are two methods that may be used to develop a Spending Plan? 1. Select a time period for your spending plan. What time period do most people use for their Spending Plan? What categories will your Spending Plan include? Why are categories different for everyone s Spending Plan? 2. 3 What are three things to consider when determining how much money to allocate to each category? Explain. 1. Plan how much money to allocate for each category. It may help to refer to a spending guide when making decisions regarding how much to spend for each expense. What percentage of net income for each expense category is included in the spending plan guide? 2. Saving and Investing: Insurance: Transportation: Food: 3. Housing: Other: What do you do if you have a net gain? What do you do if you have a net loss? 4 5 Implement the Spending Plan and ensure you stick to that plan. What are two types of control systems? 1. Why is evaluating and adjusting a Spending Plan important? 2.

13 Page A1 The Brown Family Total Points Earned 23 Total Points Possible Percentage Name Date Class Congratulations! You have been hired as a financial advisor for John and Tia Brown. During your meeting with the couple, John and Tia inform you that they have already developed a Statement of Financial Position and an Income and Expense Statement and used them to identify their financial goals: 1. Increase the amount of their emergency savings fund 2. Pay more on their monthly car loan payment to pay the loan off faster 3. Spend less money dining out at restaurants 4. Even though both John and Tia must purchase dress clothes for work, they want to spend less money on clothing every month In order to reach these financial goals, John and Tia know they need to develop a Spending Plan. This is where they need your assistance. The couple does not know how to develop a Spending Plan and would like advice regarding what changes to make to their expenses in order to reach their goals. Follow the spending plan development process below to develop a Spending Plan for the Brown family. Step One: Track Current Income and Expenses John and Tia kept all their receipts for the month of January to develop an Income and Expense Statement Review John and Tia s January Income and Expense Statement for a realistic view of their income and expenses. Step Two: Personalize Your Spending Plan John and Tia have requested that you develop a spending plan for the month of February. The couple used a spreadsheet to develop their Income and Expense Statement and have requested the same document and same categories for their Spending Plan. Find the column on the Brown family s Income and Expense Statement where the Spending Plan will be created for February. Step Three: Allocate Money to Each Category Use the column provided on John and Tia s January Income and Expense Statement to develop a spending plan for the family for the month of February. The couple has indicated a * next to expenses that are either contractual or they are unwilling to decrease. Remember to consider John and Tia s goals and consider the trade offs they will have to make as a result of the changes. The final Spending Plan must have a net gain or a zero balance. (10 points for completion)

14 Page A1 When the spending plan is complete, explain each change that you made. (5 points for completions) Expenses decreased and by how much Expenses increased and by how much Now that their spending plan is complete, re write John and Tia s goals into SMART goals using their new spending plan. Make sure to indicate the trade off(s) that will have to be made in order to reach each goal. (4 points) 1 Example: John and Tia plan to save $ for their emergency fund by saving an additional $ each month for x months. They will need to spend less on eating out to accomplish this goal. 2 Step Four: Implement and Control What control system would you recommend John and Tia use? Explain. (2 points) Step Five: Evaluate and Make Adjustments After evaluating the spending plan, John and Tia realized that if they dine out at restaurants less often they will need to increase the amount planned for their monthly grocery expense. They would like to increase their grocery budget by $ Make this adjustment to John and Tia s Spending Plan ensuring they still have a net gain or zero balance. (1 point) How has creating a spending plan helped the Brown Family? (1 point)

15 Page A1 Income and Expense Statement for: John and Tia Brown Time Period: January Amount Planned Amount for February Income Earned Income Wages or salary before deductions 5, Total Income $5, $ Expenses Deductions Often Taken from Paychecks *Contribution to a retirement program (401k, 403b) *Federal Income Tax 1, *Social Security *Medicare Saving and Investing (Pay Yourself First) Contribution to savings and investments Emergency Savings 0.00 Insurance Premiums *Health insurance, Medicaid and Medicare *Renters or homeowners insurance *Automobile insurance Housing Costs *Housing payment (rent or mortgage) *Utilities (gas, electricity, water, garbage) Transportation Costs *Automobile payment *Fuel (gasoline/diesel) *Automobile repairs and maintenance *Public transportation fees *Automobile license and registration (yearly fee) Food Costs Food at the grocery store Meals at restaurants Snacks away from home (coffees, treats) Non food kitchen supplies (plastic wrap, dish soap) Communication and Computers *Cell phone *Internet *Cable/satellite television Medical Costs Not Covered by Insurance *Medical care Clothing and Personal Care Clothing Personal care (shampoo, haircuts, cosmetics, laundry, etc.) Entertainment Movies, books, and other entertainment Total Expenses $5, $ Net Gain or Net Loss (Income less Expenses) $98.70 $

16 Page B1 Letter of Advice for the Brown Family Rubric Total Points Earned 24 Total Points Possible Percentage Name Date Class Directions: The Brown family has asked that as their financial advisor you write them a letter addressing the following questions: 1. Why it is important for us to develop and maintain a spending plan? 2. We don t know how to develop a spending plan. Would you explain exactly how you developed our spending plan so we can repeat the process? 3. What changes did you make to our January Income and Expense Statement in order to develop our February spending plan? Please make sure to explain why you made each change. 4. Our goals needed to be more specific after creating our spending plan. What do you think our new, more specific goals should be? 5. What control system do you recommend we utilize and why? 6. We want to evaluate our spending plan from month to month and ensure it continues to work for us. Do you have any advice for us regarding how to best do this? (offer at least one piece of advice) Content: All six reflective questions are addressed Answers are accurate Writing Skills: Sentences are fluent and effective Very few errors in mechanics, punctuation and word choice Letter includes an introduction, body, and conclusion Effectiveness of Presentation: Clearly prepared Easily read and neatly assembled Minimum of one page, doublespaced with 12 font and 1 inch margins. Exemplary Satisfactory Unsatisfactory No Performance Score Total Points Earned Total Points Available 24 Percentage

17 Page A2 Spending Plan: Mission Home Front Total Points Earned 20 Total Points Possible Percentage Name Date Class Dear Role Model, Our goal is to create a young adult that is better armed to manage their personal finances. We are studying spending plans (also known as a budget) in class. To help students recognize their newly gained knowledge as applicable, we are asking them to interview an adult, preferably a family member. It is hoped that this will help them understand how the family money comes and goes and gain an appreciation for money management techniques that individuals use. Instructions: Interview a role model about spending plans and how they use them, and then answer the reflection questions. (10 points for completion) 1. How is it decided what specific items money is spent on? (Example: food, clothing, etc.) How: 2. Do you write out a hard copy of a spending plan or budget? Yes No If yes: For what period of time is it? Monthly Weekly Bi Weekly Yearly Other Why did you choose this time period? If no: Do you think having a hard copy of a spending plan would help you manage your money? Explain. 3. Have you ever tracked your spending? Yes No If yes: Were you surprised at the findings? Did you spend more or less on an item than you previously thought? If no: Do you think you would benefit from tracking your spending. Explain.

18 Page A2 4. How do you ensure there is enough money to pay bills and meet expenses throughout the month in your household? 5. Do you plan to, or would you like to, make changes to the way that you currently manage your personal spending plan/budget? 6. Based on your experiences with spending plans/budgeting, what advice would you give me? 7. What do you wish you would have known regarding spending plans/budgeting when you were my age? Name of Adult: Signature of Adult: Phone number: REFLECTION QUESTIONS: Instructions: Answer the following questions. 1. What did you learn from the interview? Identify at least two items. (2 points) 2. When creating your own personal spending plan, explain how you will use each step of the spending plan process? (5 points) 3. Hypothesize the importance of communication when developing a spending plan for a family. (3 points)

19 Page A3 Spending Plans Total Points Earned 13 Total Points Possible Percentage Name Date Class Directions: Answer the following questions with complete sentences. 1. Why are spending plans an important part of financial planning? Support your answer with two reasons. (2 points) 2. What role does the Statement of Financial Position and Income and Expense Statement play in the process of creating a spending plan? (2 points) 3. The spending plan development process includes steps for creating and maintaining a spending plan. Why do you think it is important to maintain a spending plan after creating it? (1 point) 4. Templates are available for creating spending plans. Do you have to use all the categories listed on a template? Why or why not? (2 points) 5. Why is it important to identify contractual expenses when creating a spending plan? (1 point)

20 Page A3 6. Imagine that you are creating a spending plan. Using the five steps of the spending plan development process, describe in detail what you would do to create your spending plan from beginning to end. (5 points) 1. Track Current Income and Expenses Make sure to indicate how you would track your income and expenses and justify your choice by describing how it would fit your lifestyle. 2. Personalize Your Spending Plan 3. Allocate Money to Each Category Make sure to indicate how you would determine which changes to make to spending. 4. Implement and Control Make sure to indicate which control system you would use and justify your choice by describing how it would fit your lifestyle. 5. Evaluate and Make Adjustments

21 Page A4 The Carson Family Total Points Earned 43 Total Points Possible Percentage Name Date Class Directions: Read the scenario below to learn about the Carson family. While reading, underline any financial goals the family has identified and circle any changes that can be made to their financial decisions to help them reach their financial goals. (5 points for completion) Sarah and Jim met early in college. After a whirlwind romance Sarah and Jim were married in six months. It wasn t long until Sarah became pregnant. They had a son, Sammy, who is now three years old. Sarah and Jim had hoped to both finish college before they started a family; when they found out they were expecting their first child earlier than planned, they were determined to have at least one of them stay in school. Jim was very lucky to already have a job as a waiter at a popular chain restaurant. This job paid enough to support their family. Therefore, Jim and Sarah made the decision for Jim to work full time and Sarah would continue going to college fulltime. Even though Jim and Sarah have managed to get by financially, it hasn t been easy. Money is tight each month. When Sarah and Jim married, they used their credit card to fund their honeymoon trip. At the time they thought it would be easy to pay back the money charged to their credit card. However, that was before Sammy came along. They have been having a hard time making more than the minimum monthly payment on their credit card. Therefore, Jim and Sarah want to create a spending plan to help them pay off their credit card and make some other financial changes. Sarah and Jim kept all of their receipts for the month of May and created an Income and Expense Statement. As a waiter, Jim is able to work the evening shift and stay home with Sammy during the day while Sarah is attending classes. Sarah comes home at night and takes over care of Sammy while Jim goes to work. Although with this arrangement Jim and Sarah aren t able to spend much time together, it allows them to not have to pay for childcare. This is a sacrifice they are willing to make in order for Sarah to remain in school. Jim and Sarah budget $750 per month to pay for Sarah s college tuition for the entire year. The couple completes the Free Application for Federal Student Aid (FAFSA) every year. This form is free and determines if you are eligible for grants and loans from the federal government to help pay for college. Luckily, Sarah received a Pell grant this year that helps pay for $90 per month of her tuition costs. This is great because grant money does not have to be paid back like loan money. Sarah was also very lucky to receive a scholarship from the university that covers a large portion of her tuition costs. She is extremely grateful for this scholarship, because without it she doesn t think she would be able to attend college right now. However, in order to keep her scholarship she must maintain a GPA above This requires her to spend extra time on her school work. Therefore, when looking at their Income and Expense Statement, Sarah does not think they can increase their earned income. Jim already works full time and takes care of Sammy during his time off, and she does not feel it would be good for her well being to take on a job in addition to school and caring for Sammy. Even with the grant and scholarship, Sarah s tuition costs are still not completely paid for. On their Income and Expense Statement, Sarah and Jim indicate the $200 per month they are borrowing from student loans to pay for the remainder

22 Page A4 of her tuition. Sarah and Jim want to make changes to their spending in order to pay for rest of her tuition themselves versus taking out student loans. Sarah also recognizes that they currently do not have any life insurance. This makes her very uneasy, and Jim agrees that this isn t the best financial move now that they have a child. Life insurance coverage for both Sarah and Jim will cost $75 per month. Even though the couple can t increase their earned income, Jim and Sarah do see some changes that could be made to their expenses. Both Sarah and Jim are surprised to see how much they spent dining out at restaurants. The couple agrees that they will spend no more than $40 dining out every month. Jim points out that they spend $90 per month to have two cell phones, but they really only need one cell phone to keep at home in case of an emergency with Sammy. Sarah thinks this is a great idea but worries that they may be locked into a contract that would require them to keep both cell phones. After making a call to their cell phone provider, they find out that that they have flexibility with their cell phone contract and if they want, they would be able to cancel one cell phone. This would decrease their monthly cell phone bill to $ Sarah breaths a deep sigh of relief when she gets to the cigarettes category, because Jim has recently quit smoking. This is something that he has been trying to do since they married. On a recent trip to the doctor, Sammy was diagnosed with a moderate form of asthma. This was the motivation Jim needed to quit smoking. The doctor told him about a nonprofit organization that provides support and helps pay for a medicine that helps you quit smoking. After seeing that he was spending $ per month on cigarettes, Jim feels a large sense of accomplishment and is glad that money can now be used to pay for other expenses. The couple pays $ per month for health insurance for the three of them. Jim and Sarah are not willing to give up the sense of security that comes with having health insurance, especially with Sammy s asthma. In fact, even with insurance, Sammy s asthma medication costs $ per month, and the family spends an additional $ on average for necessary doctor visits each month. Of their other expenses, Jim and Sarah don t see any other changes they can or are willing to make. They already live in a one bedroom apartment, share one car, and limit their grocery, clothing, personal care, and entertainment costs. The couple is definitely not willing to decrease the $50.00 per month saved in their emergency savings fund. Follow the spending plan development process below to help Sarah and Jim create a spending plan for the month of June. Step One: Track Current Income and Expenses Jim and Sarah have already completed the tracking of their income and expenses by saving their receipts for the month of May and creating an Income and Expense Statement. From this Income and Expense Statement, they have identified several financial goals that they want their spending plan to help them reach. What financial goals did Jim and Sarah identify? (5 points for completion) What changes to expenses have the couple identified they could make to help them reach their financial goals? (5 points for completion)

23 Page A4 Place a star next to the income and expense categories that the couple can t or are unwilling to change. (5 points for completion) Step Two: Personalize Your Spending Plan Jim and Sarah would like a spending plan created for the month of June. The couple used a spreadsheet to develop their Income and Expense Statement and have requested that the same document and same categories for their spending plan. Step Three: Allocate Money to Each Category Use the column provided on Jim and Sarah s Income and Expense Statement to develop a spending plan for the family for the month of June. Use the goals and financial changes identified in step one to develop the spending plan. Make sure to consider the trade offs the family will have to make as a result of the changes. The final Spending Plan must have a net gain or a zero balance. (10 points for completion) When the spending plan is complete, explain each change that you made. (5 points for completion) Now that their spending plan is complete, re write Sarah and Jim s goals into SMART goals using their new spending plan. Make sure to indicate the trade off(s) that will have to be made in order to reach each goal. (5 points for completion) Step Four: Implement and Control What control system would you recommend Sarah and Jim use? Explain. (2 points) Step Five: Evaluate and Make Adjustments How has creating a spending plan helped the Carson family? (1 point)

24 Page A4 Income and Expense Statement for: Sarah and Jim Carson Time Period: May Amount Income Earned Income Wages or salary before deductions Commissions/tips/bonuses Unearned Income Money from savings and investments to help pay expenses during this time period 0.00 Scholarships from non government sources Other: Student loan money received Received Income from Government Programs Grants from government sources Total Income $4, Expenses Deductions Often Taken from Paychecks Federal Income tax Social Security Medicare Saving and Investing (Pay Yourself First) Contribution to emergency savings Contribution to savings to pay tuition 0.00 Insurance Premiums Health insurance, Medicaid and Medicare Automobile insurance Life insurance 0.00 Housing Costs Housing payment (rent or mortgage) Utilities (gas, electricity, water, garbage) Transportation Costs Fuel (gasoline/diesel) Automobile repairs and maintenance Automobile license and registration (yearly fee) Food Costs Food at the grocery store Meals at restaurants Non food kitchen supplies (plastic wrap, dish soap) Communication and Computers Cell phone Medical Costs Not Covered by Insurance Medical care Medications prescription, over the counter Clothing and Personal Care Clothing Personal care (shampoo, haircuts, cosmetics, laundry, etc.) Educational Expenses Tuition for private school or higher education Educational supplies: Books Entertainment Movies, books, toys, and other entertainment Other: Cigarettes Credit Costs Credit card payment Total Expenses $4, Net Gain or Net Loss (Income less Expenses) $23.60 Planned Amount for June

25 Page A5 My Spending Plan Total Points Earned 43 Total Points Possible Percentage Name Date Class Directions: Follow the steps below to create a Spending Plan for yourself. Step One: Track Income and Expenses If you haven t already, create an Income and Expense Statement to track your income and expenses. (10 points for completion) What tracking method did you use? Explain why this tracking method fits your lifestyle. (2 points) Would you use this tracking method again or try a different method? Explain. (2 points) Step Two: Personalize Your Spending Plan How will you develop your spending plan? Explain why this type of spending plan fits your lifestyle. (2 points) What is the intended time period for your spending plan? Why? (2 points) Will you add, remove, or change any categories from your Income and Expense Statement? (2 points)

26 Page A5 Step Three: Allocate Money to Each Category Using the template provided, create a spending plan for yourself. (10 points for completion) Summarize what changes you planned to your income and expenses. (5 points for completion) Write a SMART financial goal for at least one item on your spending plan. (5 points) Step Four: Implement and Control What control system will you use? Explain why this control system fits your lifestyle. (2 points) Step Five: Evaluate and Make Adjustments Why is it important to evaluate and adjust your spending plan? (1 point)

27 Page E2 Spending Plan Template Total Points Earned Total Points Possible Percentage Name Date Class Spending Plan for: Time Period: Planned Amount Income Earned Income Wages or salary before deductions Commissions/tips/bonuses Tax refunds Unearned Income Interest earned used time period Investment earnings used this time period Sales of assets Money from savings and investments to help pay expenses during this time period Scholarships/grants from non government sources Money from others Child support Other Received Income from Government Programs Scholarships/grants from government sources Other government programs Total Income $ $ Expenses Deductions Often Taken from Paychecks Contribution to a retirement program (401k, 403b) Individual retirement account contribution (IRA) Federal Income Tax State Income Tax Social Security Medicare Saving and Investing (Pay Yourself First) Contribution to savings and investments Insurance Premiums Health insurance, Medicaid and Medicare Renters or homeowners insurance Automobile insurance Disability insurance Life insurance Housing Costs Property taxes (if house or condo is owned) Housing payment (rent or mortgage) Utilities (gas, electricity, water, garbage) Household furnishings Actual Amount

28 Page E2 Household maintenance and repairs Transportation Costs Automobile payment Fuel (gasoline/diesel) Automobile repairs and maintenance Public transportation fees Automobile license and registration (yearly fee) Food Costs Food at the grocery store Meals at restaurants Snacks away from home (coffees, treats) Non food kitchen supplies (plastic wrap, dish soap) Family Member Care Child care or other dependent care Personal allowances Communication and Computers Telephone land line Cell phone Internet Cable/satellite television Computer related expenses Medical Costs Not Covered by Insurance Medical care Dental care Eye care (check ups, glasses, contact lenses) Medications prescription, over the counter Clothing and Personal Care Clothing Personal care (shampoo, haircuts, cosmetics, laundry, etc.) Educational Expenses Tuition for private school or higher education Private lessons Sports and organization fees Educational supplies (books, news) Pet Care Pet food Pet supplies (toys, medicine) Veterinary services Pet care (pet walking, overnight stays, grooming) Entertainment Movies, books, and other entertainment Vacations Other Gifts and Charitable Contributions Gifts to others and charitable contributions to organizations Credit Costs Student loan payment Credit card payment Other: Total Expenses $ $ Net Gain or Net Loss (Income less Expenses) $ $

29 2.2.5.F1 Spending Plans Advanced Level The Statement of Financial Posi on and the Income and Expense Statement help you measure your past and present financial posi on. Now you are ready to make a plan for your future money management. A Spending Plan is forward looking income and expense statement some mes referred to as a budget. It records both planned and actual income and expenses over a period of me. A Spending Plan is an important part of financial planning because it helps you take control of your spending, and, therefore, control your financial future. By using a Spending Plan to help manage your money, you will be able to increase your net worth and reach your financial goals. Use the Statement of Financial Posi on and the Income and Expense Statement to set goals and determine what changes to make to your financial decisions. Then, use a Spending Plan to implement those changes. If you thought you spent too much on a certain expense in the past, then use your Spending Plan to limit the amount of money you plan to spend in the next me period. When comparing the Statement of Financial Posi on, the Income and Expense Statement and a Spending Plan, think of the differences in terms of past, present and future financial ac vity. Have you ever developed a Spending Plan? If so, did it help you take control of your money? If not, do you think a spending plan would help you manage your money? Why is a Spending Plan an important part of financial planning? Individuals usually have more wants than they can afford with their income. Therefore, individuals must make trade offs in their spending decisions. A Spending Plan forces you to consider the opportunity costs of your planned purchases to help you manage your money in a way that maximizes your financial well being. Take Charge Today Updated August 2013 Spending Plans Page 1 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Ins tute at The University of Arizona