Phase+1


 * PHASE 1: BUDGET PLANNING

Budget** is an estimate of expected income and expense for a given period in the future. So, budget planning means to plan your finances. You must have a plan on how you will become rich. You have to keep records of how you spend and receive money. You might have to make adjustments and pay your self first.

What is personal financial planning? **Personal financial planning** means spending, saving, and investing your money so you can have the kind of life you want as well as financial security. The financial planning process has six steps:
 * 1) Determin Your Current Financial Situation
 * Make a list of your savings, monthly income (job earnings, gifts, etc.), monthly expense (spendings), and debts
 * 1) Develop Your Financial Goals
 * Values, beliefs and principles you consider important, correct, and desirable can affect your goals
 * Distinguish between your needs and wants
 * Short-term (1 yr. or less), Intermediate (2-5 yrs.), Long-term (5 yrs. or more)
 * Must be realistic, specific, and set within a defined time frame
 * 1) Identify Alternative Courses of Action
 * Other options of improving or extending your current situation
 * 1) Evaluate Your Alternatives
 * Keep track of social and economic conditions
 * Opportunity cost (trade-off), what you give up when you make one choice instead of another, involves you to know what you gain
 * 1) Create & Use Your Financial Plan of Action
 * List of ways to achieve your financial goals
 * 1) Review & Revise Your Plan
 * Reevaluate and revise it every year, and as needed


 * Money management**, planning how to get the most from your money, can help you keep track of where your money goes so that you can make it go farther.
 * Oraganize your personal financial documents (documents that tell how much money you have, bank statement, receipt)
 * Keep financial documents in home files (file drawer, cardboard box), safe-deposit box (small compartment that you can rent in a bank), or on a home computer

What are you worth now? **Persoanl financial statements**, documents taht provide information about your current financial postition and present summary of your income and spendings, can help you determing what you own and what you owe. To know what you are worth a **balance sheet**, a financial statement that lists the items of value you own, the debt you owe, and your net worth (Own - Debt), should be created. To create a balance sheet, follow the steps:
 * 1) Determine Your Assets
 * **Assets** are items of value that you own (cash, property, investments)
 * 1) Determine Your Liabilities
 * **Liabilities** are the debts you owe
 * 1) Calculate Your Net Worth
 * Assets - Liabilites = Net Worth
 * If your liabilities are greater than you assets then you may experience insolvency
 * 1) Evaluate Your Financial Situation
 * Is your net worth increasing? Update balance sheet or make a new one every few months

A balance sheet shows you what you are worth, but it will nowt show your monthly **cash flow**, the money that actually goes into and out of your wallet and bank accounts. Cash flow is divided into two parts: inflow and outflow. To create a cash flow statement:
 * 1) Record Your Income (Inflow)
 * **Income** is the money you receive (paychecks, gifts, allowances)
 * 1) Record Your Expense (Outflow)
 * **Expense** is the money you spend
 * Fixed expenses are those spendings that more or less remain the same each month (rent, cable, etc.)
 * Variable expenses are those spendings that may change from month to month (recreation, clothing, etc.)
 * 1) Determine Your Net Cash Flow
 * Income - Expense = Net Cash Flow
 * Postitive flow is surplus, more income than expenditure
 * Negative flow is deficit, more expneses than income

To acheive your financial goals "budget". Using a budget will help you to learn how to live within your income and how to spend your money wisely. You will also develop good money management skilles. Budget has seven steps:
 * 1) Set Your Financial Goals
 * 2) Estimate Your Income
 * 3) Budget for Unexpected Expenses & Savings
 * Example: Emergency funds, College savings
 * 1) Budget for Fixed Expenses
 * 2) Budget for Variable Expenses
 * 3) Record What You Spend
 * 4) Review Spending & Saving Patterns
 * Review and change budget each month as needed
 * Review progress

Preparing a budget and keeping track of every expense will not solve your financial problems. A good budget sould have certain characteristics.
 * It should be carefully planned (no wild guesses)
 * Should be practical
 * Must be flexible