Overview
Based on the lectures in class, and using the book as reference, begin laying out your budget and net worth statement in the projects.xlsx worksheet available in the first module on Canvas. You should have the Budget, Net Worth, and Expense Tracker sheets filled in for this assignment.
Directions
Start by listing and prioritizing all the things you would like to do if you had unlimited money. Then put a budget together that allows you to afford your top priorities based on your current income. Remember, the lecture for chapter 3 gave step by step directions to follow to create your budget and your net worth statement.
If you don’t have an income and live with your parents, create a move-out budget that identifies all the expenses you would need to pay once you have a job and moved out of your parents house. In the income category, research what your expected first year salary would be at a site like payscale.com or glassdoor.com. Then divide this annual number by 16 to get your typical monthly take home pay.
You are not completing a finalized budget as that will change over the course of the semester, but likely you can have 90% of the budgeted items incorporated. You are putting the framework together (meaning laying out your budget categories) and starting to enter the budget items you know about right now. As you’ve gone through your expenses for the first few weeks of class, you should have an idea about the monthly costs of many of those expenses. Additionally, your rent, car payment, and other bills can all be entered too at this stage. You should also be listing off your wishes and annualized expenses from your goals assignment, and researching how much it would cost to accomplish them.
Net Worth Statement/Balance Sheet
For the Net Worth Statement/Balance Sheet, list off all your assets and liabilities, including the interest rates and quick-sale values. If you have no debt, write NO DEBT!!! in the first debt line to celebrate your good financial position.
Budget Priorties
Once you have listed and prioritized your desired expenses, the easiest way to create the framework is to use the Excel file I gave you and we looked at in class. The file is designed to follow the process for budgeting I taught you and you can upload the file as the assignment with the first three worksheets completed.
How to Use The Budget Worksheet
Ignore any dates (especially due dates) in the videos
Things to consider as you do the assignment:
Bad Debt
Paying off this bad debt quicker will give you a lot of extra spending money in the future. Right now, you are spending money on interest and getting nothing in return. Consider doing the following to try and put more money toward paying off bad debt.
Find ways of reducing your Necessities (very difficult to do) or your High Priorities (easier to do) to get more money toward your debt.
Completely eliminate Low Priorities and even some High Priorities so you can use that money to pay off additional bad debt.
Put less money toward other wishes (or even no money for the time being) in order to get out of debt. Giving up spending on wishes now can often-times get you the wishes sooner once your debt is paid off.
Once you get out of debt, all that money that you were using for it (including all that money made toward the interest payments) will become yours to spend in whatever way you want.
Leftover Box Doesn’t Equal 0
If you have a positive number, you have money left over at the end of each month. What do you want to spend it on? You can spend it on reducing debt, increasing your savings, putting money away toward one of your goals, or anything else you want. Make sure to allocate all your money each month so you don’t randomly spend on things that you don’t care about.
If you have a negative number, you are spending more money each month than your income. Since we can’t change our income, you’ll need to adjust your expenses to figure out how to stay within your income and stay out of debt. Start by thinking creatively about little ways to lower the costs of what you spend your money on for high priorities. Then look at your low priority spending to see what you can cut. You can also cut from your wishes by spending a little less on them each month. This will mean it will take longer to achieve your wishes, but you’ll still achieve them!
Low Priorities
If you have low priorities funded or listed: If they are truly low priorities, then consider reducing or cutting them to get more money toward your high priorities and wishes. If they are high priorities, move them up.
Net Worth
Look for opportunities to lower your interest expenses and get rid of debt by using your current assets. Look at your asset list to see what you could turn to cash and send to a lender to stop them from charging you interest. Similarly, look for opportunities to change where your assets are located to make them better align with your life goals.