FINANCIAL LITERACY

SMART WAYS OF BUDGETING

Making a family budget which includes both
regular and one-time, even discretionary,
expenses, and a way to be never out of money
Divisions of Expenses
1. Regular and Non-Discretionary Expenses
2. Irregular and Discretionary Expenses
 Divisions of Expenses

1. Regular and Non-Discretionary Expenses

2. Irregular and Discretionary Expenses
 Regular and Non- Irregular and Discretionary
Discretionary Expenses: Expenses:

These include grocery, These include things like

electricity, fuel, phone, buying furniture and
laundry, domestic help, consumer durables,
eating out and valuables like gold or going
entertainment expenses. on a holiday.
EXPENSE MANAGEMENT
It is all about getting the right value for every peso spent and
appropriate decisions on the payment mode.

If the seller offers zero –interests equated monthly

installments, compute the cost effectiveness by looking at the
hidden costs like the processing fee.

Credit card may be used only as a mode of payment rather

than a source of finance. Impulse buying for expensive items
out of budget on account of “sale”, “discount”, etc. should be
strictly a NO.
GET THE BEST DEAL
  Negotiation plays a key role in saving money and get the best deal. We
should not hesitate to ask for complimentary products and services.
 For instance, we can negotiate room tariff in case of hotel booking or ask
for complimentary breakfast, lunch and dinner and airport pick-up and
drop.
 Consumers also have the right to demand discount on the maximum
retail price printed on products.
 With the rise of online shopping, we can get deals on the web.
 The internet allows us to compare prices of various products and
services and choose the best option.
 Sometimes, this helps us to get discounts and gifts as well. We can also
rent flats and buy/sell other assets through the internet and save
brokerage, which can be pretty high. This will reduce expenses to a large
extent.
 GOLDEN RULES OF MONEY MANAGEMENT
 Put a broad limit to regular expenses so they do not
go out of control.
 Look at various payment options such as zero-
interest equated monthly installments while buying
a valuable item.
 Do not hesitate to ask for discounts and
complementary services.
 Before making a big purchase, surf the internet to
look for discounts.
 The internet can also help you save on brokerage
while buying an insurance product or even a house.
 No more than a third of one’s income should be
used to service debt; savings must be at least one-
third the income.
What is Personal Finance?
Personal finance is the process of planning and managing
personal financial activities such as income generation,
spending, saving, investing and protection. Finance is defined
as the management of money and includes activities like
investing, borrowing, lending budgeting, saving and
forecasting. The process of managing one’s personal finances
can be summarized in a budget or financial plan. This guide
will analyze the most common and important aspects of
individual financial management.
Areas of Personal Finance
 INCOME
Refers to a source of cash inflow that an individual receives and then uses
to support themselves and their family. It is the starting point of our
financial planning process.

Common Sources of Income are:

Salaries
Bonuses
Hourly Wages
Pensions
Dividends
 SPENDING
Spending includes all types of expenses and individual incurs related to
buying goods and services or anything that is consumable. All spending
falls into two categories:

Cash- paid for with cash on hand

Credit- paid for borrowing money
The majority of most people’s income is allocated to spending.

Common sources of Spending are:

Rent
Mortgage payments
Taxes
Foods
Entertainment
Travel
Credit Card payments
 SAVINGS

Savings refers to excess cash that is retained for future

investing or spending.
If there is a surplus between what a person earns as
income and what they spend, the difference can be
directed towards savings or investments.
Managing savings is a critical area of personal finance.
Common Forms of Savings include:

Physical cash
Savings/ bank account
Checking bank account
Money market securities
 INVESTING
Investing relates to the purchase of assets that are expected to generate
a rate of return.
With the hope of overtime, the individual will receive back more
money than they originally invested.
Investing carries risk, and not all assets actually end up producing a
positive rate of return.
This is where we see the relationship between risk and return.
Common Forms of Investing includes:

Stocks
Bonds
Mutual Funds
Real Estate
Private Companies
Commodities
Art
 PROTECTION

Personal protection refers to a wide range of

products that can be used to guard against
an unforeseen and adverse event.
Common Protection Products include:

Life Insurance
Health Insurance
Estate Planning