Lesson #1: Create a Budget

List some of your financial goals:

• Would you like to purchase a laptop or car?
• Do you plan to pay for a college education or start a business?
• Do you want to earn a certain amount of money by a particular age?

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1. In order to reach financial goals, it is important to make a plan for spending and saving. This plan is called a budget. An important part of creating a budget is tracking exactly how much money comes in and goes out each month. The concept of money coming in (income and earnings) and money going out (expenses and spending) is called cash flow. Just like ocean waves move in and out with the tide, our money is earned and spent. The difference is that we can control how our money flows by creating a good budget.

2. What have you spent money on over the last week?
   
   Have you bought any food, clothing, jewelry, or electronics?
   Have you gone to the movies with a friend or bought any groceries or food?

List some of your recent purchases:

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There are different types of expenses:

Fixed expenses. These are the same each month, such as rent, phone, or Internet/WiFi. Fixed expenses are similar to needs. Discuss what are needs.

Variable expenses change in price and frequency each month, like food or gas.

Variable expenses are similar to wants. Discuss what are wants.

Next to your list of recent purchases above write whether it is a fixed or variable expense. Discuss how your financial goals fit into these categories, too. As you become more independent, more expenses will become fixed. For example, rent, phone, Internet/WiFi, loans for a car, and college will be fixed expenses.

3. Have you earned any money this month (e.g. paycheck, allowance, gift)? How do you keep track of what you make and spend?

Just like we need to track what we spend, we also need to track what we earn. This process is called cash flow and we use a budget to monitor our spending and our earnings.