Money Management Guide

Top 10 Most Important Concepts!

Depository Institutions

What is a depository institution? Depository institutions are businesses that provide financial services.

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1. Types of Depository Institutions

Commercial Banks

  • For profit
  • Open to anyone who wants to utilize a depository institution
  • Offer numerous financial services
  • Usually the largest depository institutions

Credit Unions

  • Not-for-profit / owned by members
  • Have membership qualifications / members must share a "common bond"
  • Offer many services but usually not as many as a bank
  • Are often able to pay higher interest rates and charge lower fees

2. Features of Depository Institutions

Online Banking

What is it?
  • Complete certain transactions from a secured internet site
  • Use a username and password
What can you do?
  • Access account information any place
  • Transfer money
  • Pay bills/set up recurring bill payments
  • Apply for credit

Mobile Banking

What is it?
  • Apps that many depository institutions have developed that allow online banking from mobile devices
What can you Do?
  • Usually offers the same services as online banking

Debit Cards

What is it?

  • A plastic card that is electronically connected to the cardholder’s depository institution account
  • What can you do?

    • Function in the same manner as checks but faster and more portable

    Other Information

    • Use a Personal Identification Number (PIN) or signature to authorize transactions


    What is it?
    • A machine that allows individuals to complete certain transactions from the machine without human assistance

    What can you Do?

    • Withdraw and deposit money
    • Transfer money
    • Check account balance
    Other Information
    • Accessed via an ATM card (usually the debit card) and PIN

    Contactless Payments

    What is it?

    • Transactions completed with no physical connection between the payment device and the Point of Sale (POS) device or store clerk

    What can you do?

    • “Wave” a card in front of a sensor for fast and easy transactions
  • Other Information
    • Not all merchants have this technology


    Taxes are the sum of money demanded by a government to support the government itself as well as specific facilities or services. Taxes are paid by taxpayers, people who pay taxes to national, state, county or municipal governments.

    3. Taxes

    Income Tax - tax on earned and unearned income

    • Earned Income - money earned from working for pay

    EX: Wages/Salaries from employment

    • Unearned Income - income received from sources other than employment

    EX: Interest earned from a savings account/ profits made on investments

    • Federal Income Tax

    Determined by - earned and unearned income

    Helps Fund: Operations of federal government, national roads, education, National Defense, Disaster relief, National Parks/Museums, Gov. Assistance Programs

    • State Income Tax (varies by state)

    Determined by - earned and unearned income

    Helps Fund: State highways, operations of state government, schools, State Parks, State Assistance Programs

    Payroll Tax - A tax on earned income that supports the Social Security and Medicare programs

    Determined by - percentage of earned income

    Helps Fund: Social Security program and Medicare program

    Property Tax - a tax on property, such as land, buildings (including homes), and motor vehicles

    Determined by - percentage of property value

    Helps Fund: Schools and Expenses of State/Local governments

    Sales Tax - tax on purchased goods and services

    Determined by - percentage added to the original price of an item

    Helps Fund: Expenses of State/Local governments

    Excise Tax

    Determined by - Purchase of certain items: gas, hotel rooms, airline tickets, cigarettes, alcohol, etc. (often included within price of these items)

    Helps Fund: Expenses of State/Local governments

    4. How Tax Rates are Determined

    • Determined by public representatives (city councils, county commissions, state legislatures, Congress)
    • Elected by voters (taxpayers)
    • Work as a voting group to elect representatives who will represent the majority

    Statement of Financial Position

    The Statement of Financial Position is a financial statement that describes an individual or family’s financial condition on a specified date by showing assets, liabilities, and net worth.

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    5. Statement of Financial Position Components

    Assets -

  • Everything a person owns with monetary value
    • Monetary Assets - can be quickly/easily converted into cash (Cash/Money in Checking/Savings account)
    • Tangible Assets - Personal property that was purchased to create a lifestyle or improve your life (Homes/Automobiles/Electronics)
    • Investment Assets - Financial assets purchased with the hope that they will generate income and appreciate in value to make it possible to sell at a higher price in the future (Value of retirement accounts/Stocks)

    Liabilities - A debt/obligation owed to others (Loans/Balance on a Credit Card)

    Difference between Liabilities/Expenses

    • Liabilities: money owed to others, total amount owed
    • Expenses: money spent, bills paid on a regular basis

    Net worth - The measure of financial wealth


    • Assets - Liabilities = Net Worth

    Your "financial thermometer" to objectively measure your financial position

    To increase your net worth you must Increase assets or decrease your liabilities.

    6. Money Management Tools

    Statement of Financial Position

    • What is my financial position TODAY?

    Income and Expense Statement

    • How have I managed my money in the PAST?

    Spending Plan

    • What is my FUTURE money management plan?

    Work together to help you objectively evaluate your past, present, and future financial decisions = Reach net worth level desired

    Income and Expense Statement

    The Income and Expense Statement lists and summarizes income and expense transactions that have taken place over a specific period of time, usually a month or year.

    7. Money Management Tools/ Components

    Money Management Tools

    • How I have managed my money in the past?
    • Tells you where your money came from and where it went.


    • Income - money received (earned (gross/net)/unearned, received income from government programs)
    • Expenses - money spent (taxes, savings/investing, insurance, housing, transportation, food, other)
    • Net gain/Net loss - Income + / - Expenses = net Gain/Loss

    8. Tracking Methods

    • Record in writing
    • Smartphone
    • Keep receipts
    • Depository institution account statements
    • Money management computer software programs

    A written system is more effective than a mental system!

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    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.

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    9. Importance of a Budget/Money Management Tools


    • Help manage your money in a positive manner
    • Increase net worth
    • Help set/reach goals
    • Analyze the opportunity costs of your trade-offs to your maximize your financial well-being

    Money Management Tools

    • What is my future money management plan?
    • Determine what changes to make in the Statement of Financial Position and the Income and Expense Statement then make those changes in your Spending Plan.

    10. Spending Plan Development Process

    1. Track Current Income and Expense (developing)

    • Completed by developing Income and Expense Statement
    • Ensures spending plan is realistic

    2. Personalize Your Spending Plan (developing)

    • How will you develop a spending plan?

    Any written method that works for you: paper/pencil, spreadsheet, money management computer software, or applications

    • What is the intended time period for your spending plan?
    • What categories will your spending plan include?

    3. Allocate Money to Each Category (developing)

    • Reference tracking from Step One
    • Determine what changes to make

    Consider: trade-offs/opportunity costs, goals, and contractual expenses

    Contractual Expenses-required to pay expenses for a specific amount of time (not easy to reduce/eliminate) EX: Rent, Internet, Cell-phone

    Non-Contractual Expenses - Easy to reduce/eliminate EX: Food, Entertainment

    4. Implement and Control (maintaining)

    • Make your planned spending decisions
    • Use a control system to stay on track

    Control systems: Money management computer software, Internet-based spending plan program, Depository institutions programs, Check register system, envelope system

    5. Evaluate and Make Adjustments (maintaining)

    • How well did your spending plan work?
    • Is your spending plan helping your reach goals?
    • Do you need to make any adjustments?