Money Instructor – Page 64 – Articles and Informational Resources: Money, Personal Finance, Business, Careers, Lifestyle

Teaching Money Skills Classified by Grade Level: Ninth Grade and Tenth Grade

Entering the High School years, ninth and tenth grade students now have the opportunity to pick and choose classes they find interesting and want to learn more about. Many students decide to take Economics (see Basic Economics Lessons) because the business world interest them and this course is the first step in deciding if working with finances is the step toward a future career.

Students find that their economics course, although has a lot to do with money and numbers, also is dependent upon a certain way of thinking. Honesty and morals is part of this course, as well as some psychology and future financial planning. Investments and where to invest their own money, as well as client’s money, becomes a risk and some students find after the first class comes to an end, economics is not for them.

The course usually is broken up into different sections from the basics, which ninth and tenth grade students attend, to the second level for the upper classmen to take. Also, students find the teacher not to be a math teacher but a Social Studies teacher! Why would a humanities teacher be teaching an economics course? As students attend these courses, they begin to understand why.

The students will learn about the costs and benefits of money in regard to the standard of living, income, markets, and trade. Teachers will discuss investments (see investments lessons): what they are, which ones are traditional, which ones are risky, market values of property, and the role that government partakes in our economic lives. Of course, with ninth and tenth graders working their first jobs, the most important concept to them all is taxes and how come half of their paycheck goes to FICA!

After the course is complete, then students understand why a math teacher usually does not teach this course. Many humanities teachers majored in economics or had once worked in the field from a stockbroker, real estate broker, lawyer, and beyond. Teachers show students how to analyze the market, learn business ethics, how competition and consumer choices determine the market value, as well as the laws of supply and demand.

Economic courses are considered an elective and not in place of any math courses. Typically, ninth and tenth grade students are taking this course because they chose to. In addition, many students find a new respect for their Social Studies teachers when they are teaching them a subject they find interest in.

Since electives last for half a year, after economics is complete; students can take business management, advertisement, minorities, or psychology the second half of the school year to add to their knowledge of beginning to understand the financial world.

Many of the economic concepts are only introduced in the first course and if students find interest in finances, there are many other business related courses and clubs they can join, now that they are in high school from DECA to being the treasurer of the student council.

Go to Basic Economics Worksheets and Lessons

Go to Investing Money Worksheets and Lessons

Teaching Money Skills Classified by Grade Level: Seventh Grade and Eighth Grade

Seventh and eighth grade students now have the skills of addition, subtraction, multiplication, and division and know how to compute all these operations with money and decimals. The next part of learning about money and financing is geared more toward the business aspect.

During these two grades, students will begin to learn about change from a purchase, discounts, commission, price markup, sales tax, shipping and handling, and interest rates. Some of these topics will be fully taught and others will be introduced (see Consumer Math).

Up to this point, the learned skills of money have been discussed so students can be able to use in real life situations. Teachers in the prior grades have taught and tested all the students skills regarding computing money and the students will learn now how this topic will relate to them in their own life.

When students begin in the middle school levels, the classes can be larger and the teachers do not follow every student to see if they handed their work in on time. Teachers have close to 150 students a day where at the elementary level, they could have 20 – 50 students. The new teenage students need to be responsible for themselves concerning their school work and if a concept is not understood, the teacher expects them to ask questions or get extra help. With all the physically changes occurring, many students will not feel comfortable asking a teacher for help and this could be their downfall of not learning the next concepts regarding finances.

Students know how to purchase an item, give the correct amount of money to the cashier, and receive the correct amount of change. What if the roles were reversed and the student is working as a cashier, could they make change and add the correct sales tax onto the purchaser’s item? In seventh and eighth grade, teachers will spend time with real life concepts concerning finances. During these grades, Algebra is being taught as well and where the majority of time is being spent.

The teacher will explain financial terms with real life problems by role playing using the students in the classroom. For example, let’s say Toby is working at a clothing store in the mall and Jon walked in. Toby greets Jon and asks him if he needs any help finding a certain item. Jon says yes and Toby spends a half hour helping Jon buy a pair of jeans and two shirts. The total bill came to $140.00 and since Toby was the sales person helping Jon, Toby will make a 10% commission from this sale.

After the teacher has the student’s role play this word problem, then she or he has the entire class at their individual seats try and solve the problem. The class gets five minutes to work it out and then the teacher will go through the problem as a class. Some teachers use visual aides to help students understand the concept. The formula for the problem should be written clearly on the board and all the students should have it written down in their notebooks. Next, the numbers from the word problem should be plugged into the formula, and then solved.

When the concept of commission, sales tax, discounts are being taught to be solved; the easiest way for students to learn these concepts are by practicing with the teacher. All formulas should be taught, written in the students math notebook, with an explanation of when and how to use them.

Go to Consumer Math Worksheets and Lessons

Grade Level Skills, Teaching Money
7th grade, 8th grade
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Teaching Money Skills Classified by Grade Level: Fifth Grade and Sixth Grade

Fifth and sixth grade students now have the skills of addition, subtraction, multiplication, and division. They can recognize monetary values and can use their learned skills in real life situations. Teachers in the prior grades have introduced multiplication and division of money and now the students will learn the decimal rules pertaining to this concept.

According to state standards, by the end of fifth and sixth grade, students should have the skills of computation to add, subtract, multiply, or divide fractions, decimals, integers, percentages, and money values (see Money Math). Any number value is expected to be solved and the use of mental strategies like problem solving, as well as a pencil, paper, and calculator, students should be familiar with. Comparisons are also taught so when students are in the real world, they can mentally calculate the price of an item and make a comparison.

As students become more knowledgeable in money, they can begin to look for part time jobs. Teachers have found students who work as a babysitter or newspaper person have a stronger concept of money, its value, what it represents, and what it can get them. The best lesson to teach about the value of the dollar is the reality of life.

One way a teacher can help their students understand the importance of the dollar is by developing a two month long project, where they must keep an average amount of money in a fake bank account (see Banking Lessons). Some expenses which can be mandatory are food, shelter, and clothing. Then the students will be given a list of necessities and luxuries with weekly pricing for each service and be told to choose between two and ten more items. The items on the list are flexible and always can be changed. Each week the teacher will ask the students for a copy of their expenses for the week.

The students are required to keep track of every expense, similar to a check book ledger, for any item money is spent on (see Checking Lessons). The teacher will give ten charts for all the project weeks. On the first chart, the total amount of money being used will be in the first row plus the prices for food, shelter, and clothing. Nothing will be calculated, this is the students job. Since the cost will be repeated weekly, each chart will have these three items already. The chart will have columns for: the item, day it was purchased, cost, and balance remaining for the total account.

The students will have their choice of items but must not lose all their money throughout the ten week project. Depending on the teacher, some offer items which will increase income which incorporate how to save on energy costs. This long term project will teach life skills, financial skills, problem solving, and incorporate all the computation concepts.

By having students choose their expenses and visually see the cost of every item, the teacher hopes to help students realize the value of money. The internet, cell phones, video games, and all the luxuries many students would like to purchase may not be possible during their 10 week long project.

Go to Money Math Worksheets and Lessons

Go to Banking Lessons

Grade Level Skills, Teaching Money
5th grade, 6th grade
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Teaching Money Skills Classified by Grade Level: Fourth Grade

By fourth grade, students should be able to recognize all the coin amounts and write their correct values, as well as the dollar amounts. Forming different values by combining the dollars and coins should also be achieved, as well as addition and subtraction of monetary values. Learning to line up the decimal points and carrying them throughout a problem can be a challenging concept but must be learned before approaching multiplication and division of money, which usually begins in fifth grade.

Considered consumer math (see Consumer Math Lessons), converting money values will be taught, as well as learning to give the correct change and receive the correct change after making a purchase (see counting money lessons).

When students enter fourth grade, the teacher will review the basic monetary values starting with the coins and dollars. This may take the teacher almost two weeks between review, exercises, and testing. Once the teacher feels the class is satisfactory in their knowledge of money values, symbols, and recognition, then they will begin the review of addition of different money values (see Money Math). The teacher will start with the coin values; for example $.25 + $.10 = $.35. Next will still use the coin values but will mix the coins together to make new values like $.93 + $.57 = $1.50. The reviewing of addition with money will last for one week; starting with the basic coin values and leading up through the dollar amounts. It may seem very basic but after the summer vacation, children need to review concepts that were just taught in the prior grade level.

Continuing with the review, the teacher will follow the same process as addition for the subtraction of money values. This review also will last a week starting with the basic coin values to the dollar amounts. Due to the monotony of these concepts, many teachers will create a game for their students. Some games can be played in a group of three to five students, partnered, individualized, or full class participation. Ideas for interactive learning games can range from a puzzle worksheet to a wheel of fortune type of game where all the phrases are money terms and the values on the wheel are math problems which must be solved before choosing a letter. The more creative a concept, the easier it will be for students to remember addition and subtraction of money.

What will be new in grade four is converting coin and dollar values. With addition and subtraction already learned, this standard should be fairly easy for students to learn. The reality is in kindergarten, the teacher had the students interactively converting the coins to different values when they played the shopping game. In fourth grade, the difference is the students will have to mentally solve the problems as if they were in the real world. This begins the teachings of finances and help students understand the value of money.

For example, the teacher may write certain money values on the front board and ask the students to copy them into their notebooks. Then they will ask them to write, in words, the different ways the one value can be achieved. The value $4.28 is written on the board. The teacher gives the students five minutes, individually at their seats to answer this problem. The teacher asks the class for participation and will write all the answers on the board to discuss each answer with the class. An example of one of the answers could be: three one dollar bills, five quarters, and three pennies. If the teacher finds this value too hard to begin with, they can lessen it to just coin values. Each class works at a different pace and it is up to the teacher’s discretion.

By requiring students to write in words the monetary values, this incorporates the new thinking of combining the subjects to allow more understanding of why English and Math must be learned in school or crossing the curriculums. The basics of multiplication and division of money are introduced and reviewed but the main focus in fourth grade is to teach students how money relates to the real world. They begin to understand the value and how the finance world works.

Go to Counting Money Worksheets and Lessons

Go to Spending Money and Consumer Math Lessons

Go to Money Math Worksheets and Lessons

Grade Level Skills, Teaching Money
4th grade
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Teaching Money Skills Classified by Grade Level: Second Grade and Third Grade

Students have learned all the coin and dollar amounts prior to entering second grade (see counting money lessons). They learned how to combine the coins to make higher values, as well as adding the dollar values with the coins. They were slightly aware of the addition process they were displaying, but thought of it more as play money and a game to get the correct value the teacher announced. The basic skills of addition and subtraction also were taught and now, at the second grade level, adding and subtracting of money will be taught (see Money Math).

Before monetary value is even taught, the teacher must teach about the decimal point and what rules it represents and followed during arithmetic. The concept can be abstract to some second grade students. Many times mentioning the money part does not come till the end of the lesson, as if it was a surprise. The first part, which is repeated numerous times, is matching up the decimal points. First, the cent values are used, only two numbers for the first week or two. Then the dollar amounts are used, reminding the students that regardless of how many numbers there are, the decimal places must always line up.

This is not an easy concept and money isn’t mentioned at first till a few weeks into the lesson. Each student has a set of fake money (see fake money) to help them understand the concept. In the real world, adults use real money where we can count our values so why shouldn’t students have the same opportunity when learning? The students do not receive the fake money till the concept of a decimal point is understood. Teachers will give a ditto with problems ranging from the basic concept of one place holder with a decimal, to the more challenging of four place holders with a decimal after two numbers. The first few problems, the decimal will be lined up properly; the last few; the student will have to line up the decimal themselves by rewriting the problem.

The reasons for this are decimals are not just used with money values but with percentages and weight. To be able to teach a concept with more than one meaning helps the students and teachers. Once this is learned, then the students are told that money is also written with decimal points. For example, a quarter is valued at twenty-five cents; then the teacher shows the numerical value written out is $.25. The same goes for the five dollar bill, first it is written in words and then the numerical version of $5.00. There is practice writing the values from the numerical value to the written word and vice versa. If a student doesn’t understand this first concept before moving forward, they could become very confused.

What money is used for and the basic need and value of money is not taught till fourth grade. Due to state standards in math requirements, the concept of adding decimals and recognizing money is what must be taught and focused on. Beginning in third grade, the comprehensive problem solving questions will begin. This requires understanding both reading and math skills, and problem solving skills.

Most of third grade is review of the money concept of addition and subtraction and teaching multiplication and division. Through the problem solving, many times the questions require these processes to be used. Due to the decimal point not having to line up, many students begin to feel lost and shy away from asking for help.

Be aware at this level that if a student or your child is displaying a frustration for math, this very well could be the culprit. Between second and third grade, the four different operations are taught about decimal place and money. It can become confusing for a student who is still trying to retain the first part of the concept from a year ago!

Patience and understanding with these students will be appreciated and it is not about not learning the concept but just learning at a different pace. The reality is students today are learning and retaining a lot more information than ever before and due to the state standards; it puts pressures on both the student and teacher. The reason being is it all comes down to money.

Go to Counting Money Worksheets and Lessons

Go to Money Math Worksheets and Lessons

Grade Level Skills, Teaching Money
2nd grade, 3rd grade
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Teaching Money Skills Classified by Grade Level: First Grade

The students at the first grade level have learned about the basics of money with the recognition and value skills of the penny through the quarter. They are aware of the differences of color, shape, feel, and value. First grade teachers continue to work with their students to help improve their addition and subtraction skills (see counting money with coins) of the basic numbers of single placement to four place holders. First grade students will also learn the higher amounts of money and how to use the combination of both monetary values.

The teacher will begin with the review of the coins and then introduce the paper values of the dollar. The one dollar, five dollar, ten dollar, and twenty dollar bill will be shown. Then the teacher will ask the students what are the differences and similarities. This concept is first taught as a visual lesson, then monetary lesson, and lastly, how to combine the dollars and coin amounts.

One of the easiest ways to teach about the different dollar amounts is to use paper fake money (see play money). First, the teacher will show the real version of all the dollars and each student will have their own set of fake money to coincide with this display. A hand-out or workbook page will be used for the students to write down the correct value of each pictured bill. For example, the teacher holds up a five dollar bill; then she asks the class which bill she is holding. The entire class answers together, the five dollar bill, and then they write down the answer next to the picture on their practice sheet. This makes the lesson interactive, as well as helps the auditory and visual learners.

Each monetary value will be reviewed in this format of teaching for a few days before moving to the next concept. Once the students are ready, then they will have to identify the differences and similarities of the different bills. For example, a similarity is the color of the bills and the differences are the president’s faces and monetary values. Any of the extra markings and watermarks are not even mentioned since the focus is on the students learning how to use money.

Once all this is taught and repeated for a few lessons, now it is time to begin how to combine the two concepts of coins and dollar bills. Most of the adding and subtracting of money will be taught at the second grade level, but the basics can be started in first grade. The students can be partnered with each other and the teacher will call a monetary value out loud and the partners need to take their fake money to replicate the announced value. This focuses on cooperative learning, problem solving skills, auditory skills, and interactive learning. Every few times, a teacher can write the value on the board to help the visual learners as well.

The teacher gives each problem a total of three minutes to replicate the numerical value. Then she shows the correct answer to the students and the students have to keep track of how many they get right and wrong. Also, the teacher can have a hand out for the students so every number value is written on the sheet. There are many options of how to teach the basic concept of coin and dollar combination amounts and these are just a few of them.

Usually adding or subtracting is not introduced till second grade because students are still learning just how to use regular numbers to do arithmetic. By second grade, they should be ready for the more abstract concept of decimal points and following the decimal point throughout the problem.

Go to Counting Money Worksheets and Lessons

Grade Level Skills, Teaching Money
1st grade
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Teaching Money Skills Classified by Grade Level: Pre-K through Kindergarten

The recognition of money for young children is a concept which is not difficult to learn. Understanding the monetary value and what each individual coin or paper represents is the challenge. Each grade level teaches different aspects of what is money to how to spend money. Starting with the lowest grade, pre-K through Kindergarten, this article will explore the many techniques of teaching children how to remember what money equals.

Depending on which part of the world you reside, each country teaches the money system which relates to their life. Obviously if the dollar is used then the Euro will not be taught.

Between Pre-K and Kindergarten, students will learn to first identify the names of the coins (see money recognition). Many begin with the penny since most children are already familiar with this coin. The distinct copper color makes this the easiest for children to identify due to its difference of color. Also, many times when a child walks by a wishing fountain and looks in, the parent will ask the child if they would like to throw a penny in to make a wish. The tactile movement with the verbal command reinforces the identity of a penny.

The other coins that begin to be identified are the dime, nickel, and quarter. Usually Kindergarten teachers begin with the penny, and then move to the nickel, dime, and then quarter. Besides the difference of shapes from small, larger, smaller, and largest, when the child learns the values of the coins, they already have been taught from the least amount, a one cent penny, to the highest amount, a twenty-five cent quarter.

Many times children first learn to recognize the different coins and then begin to remember the value of each. The best way to have a Kindergartner retain the concept of money is by role playing. Putting the students into groups and assigning them each a role helps with the organization of play. Each student will have the same amount of money and each item is labeled so regardless of what they choose, all groups will end up with the same total. The teacher will tell a story while the students act it out together. For example, one child plays the cashier at a store while the rest go food shopping. When they approach the counter, the students get their items rung up and the cashier gives them the total due.

This practices adding basic numbers, as well as students cooperatively working to give the correct amount of money to the cashier. The teacher gives the students up to ten minutes to double check their work and places the money on the desk. Once everyone is done, the teacher will then visually and verbally shows and writes on the board the correct combination of money that should amount to their total cost from shopping.

Kindergarten teachers continue to do reinforcement exercises throughout the year to keep the students understanding the concept of money. By the end of kindergarten, students should be able to identify all the basic coins and the dollar and five dollar bill. Working with money teaches students how to work together, verbally communicate properly, and how to use their addition and subtraction in the real world.

Go to Counting Money and Recognition Worksheets and Lessons

Grade Level Skills, Teaching Money
kindergarten, pre-k
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Options for Paying for College: Loans and Grants to Consider

Paying for college is stressful in any situation, but with economic hard times facing many people, it becomes even more important to look for options that can help you to get your college student through school, or help you to pay for your own schooling costs. Keep in mind, the competition for resources to pay for school is fiercer than ever, which means that students need to act quickly and put forth his or her best offer.

Finding Aide
One of the first thing for students to do is to get started on looking for financial aid options early on, even as early as Junior year in high school. Find out what options are available so you can apply as soon as you qualify. Further, improve your eligibility for this type of financial aid. Determine what your true income is now, for example, if you lost a job. Many schools have taken to increasing their aid allowances to help ensure that more students are able to enroll. Therefore, still apply to colleges you want to go to, even those more expensive options.

Ways To Save
Save money throughout your college career by making smarter decisions now. For example, high school students should try to take as many AP courses as possible and prepare for the SAT’s and ACT’s. Doing well in these areas will help you to qualify for scholarships and grants that other students cannot. Schools that allow students to earn college credit in high school can also be beneficial options to consider.

Federal, State and Other Aid
Federal student aid is often available, especially low cost loans to student. A good place to start is with the United States Department of Education’s FAFSA application, which can help you to qualify for numerous loan options. It will also provide students with options for grants, including qualifying for the Federal Pell Grant Program, which is a needs based program for low income undergraduate students.

Mistakes to Avoid
There are numerous options available to students for paying for school, but there are reasons to be careful about funding options. In some cases, people can make costly mistakes:

Avoid taking a withdrawal from your retirement benefits to pay for college. Although in some cases you will be able to take a withdrawal without paying additional taxes, you are cutting significantly into the earning potential of these accounts.
Avoid paying for college on a credit card. This, too, can be incredibly expensive to you. More so, most people will qualify for low cost loans through student aid instead. The interest rate on credit cards can be two or three times as much, if not more, than the rates on credit cards.

There are options for paying for college. The key is for you to ensure you make the right decisions moving forward. Making wise decisions regarding your financial situation right now will help you to pave the way for financial success throughout your life. More so, it can help to minimize the amount of money you pay out overall for school.

Debt & Credit, Education, Saving Money
credit, debt, student loans
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Self-Confidence Boosts for Job-Searching Teens

Psyche Yourself Up to Get the Job You Want

Looking for a job can be a disheartening thing for anyone at any age. This is especially true for you teenagers out there. It’s always hard to hear the word no or to see someone get a job you know you could do better.

After hearing no several times, it’s easy to give up or get depressed. But there’s no reason to let it get to you! Being realistic in your expectations — it is a tight job market out there these days, after all — is the first step in having and maintaining a positive outlook when it comes to finding a job, especially to finding a first job.

And that positive outlook shows. Remind yourself to stand up straight and look people in the eyes when you’re filling out applications or interviewing for a job — and say to yourself, repeat after me, I am a great person. I can do this job. I am smart. I am capable.

Seem silly? It isn’t. What you tell yourself inside has a huge impact on what your outside self is saying. When you feel good about yourself and your abilities, it will show in your body language and your overall demeanor. When you rock, and you do, it will show!

Oh, and SMILE. This may be hard if it’s the tenth interview you’ve had only to not get any of the jobs. But smiling shows you’re open and friendly. No, after all those turn-downs you may not feel all that happy, but this may be the employer that says yes — which is something to smile about, isn’t it?

It’s also easy to lose sight of your good qualities when you’ve had a few rejections. So before your next interview or going to talk with a manager and fill out an application, sit down and make a victory list.

Yep, a victory list. Write down all the things you’ve done right—and well! Like the time you remembered Mom’s birthday without being reminded by Dad. And the time you helped Mr. Stanton across the street keep his lawn mowed when he hurt his back and couldn’t do it himself. That A+ on that science exam. Oh, and don’t forget the time you didn’t smack your sister for using your hair gel. All of these are victories and examples of things you’ve done right.

After you made your list, read it. Now read it again. Don’t you feel better? See, you are a terrific teenager! Those employers just don’t know what they’re missing out on by not hiring you, do they?

Now take that confidence with you into the next interview. Use the nervous energy to show enthusiasm for the job you’re applying or interviewing for. Your eyes will be shining and bright from positive energy so strong the employer will just have to hire you. This one, after all, will know a good thing when he or she sees it.

And if he or she doesn’t? Keep that head held high, tell yourself how great you are and that someone soon will see how much you’re capable of and give you your first job—and they will!

Teen Job Alert: How Not to Get a Job

When it comes to getting a job, you can find more advice than you can possibly imagine. It’s all great information to have and you should definitely read and study as much of it as you can.

What most of that information and advice leaves out, though, is what will really cause you not to get a job. People tell you all the do’s but leave out the don’ts—and the don’ts are what will keep you from getting the job you want quicker than all the do’s done correctly will get you one.

For instance, never show up for a job interview late. An employer will think to himself or herself that if you don’t care enough to show up for the interview on time, you can’t be trusted to show up for work on time.

And never dress like you would to go anywhere but the fanciest restaurant. This means don’t wear your favorite jeans, even though they’re your lucky jeans. Dress up, even if all you’re going to do is go to McDonald’s and fill out an application. The manager will notice, believe me. And he’ll remember you out of all the two hundred other teenagers that applied for the same job.

Don’t take your cell phone. You know to turn it off, but in your rush and anxiety you may forget to turn it off. If an employer thinks you’ll be spending hours of his or her time making personal phone calls, you can forget about getting the job. Besides, it’s simply disrespectful to have a cell phone ring during an interview, or even while filling out an application at the job site.

Don’t talk too much. Nerves can cause people to babble, and in an interview, this is easy to do. Also, only answer the questions you’re asked. Don’t start answering, only to go off on a tangent about the cool vacation you went on this past summer or your favorite rock group. Even if you’re asked about these things, keep your answers short and friendly — and more important, focused to the question you were asked.

Don’t be overly friendly. You want a potential employer to like you. That’s perfectly understandable, but working too hard at it can make you look fake and won’t earn you any Brownie points. Just be yourself. That’s who the employer really want — and will ultimately get!

Careers, Kids & Money
advice, jobs
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Can Budgeting Software Help You to Stay on Track?

Budgeting software can be a helpful financial tool. For many families, the thought of planning a budget is daunting and overwhelming. Just the thought of it makes people avoid making a budget. However, a budget can be an incredibly helpful financial tool. It allows you to plan where your money is going each month and helps you to achieve financial goals you set up. If you like to manage your accounts online, the right budgeting software can really help you to save money and even make money.

Finding the Right Program

The first thing to do is to look for budgeting software that fits your needs. A vast number of options are available to consider, but not all provide the same level of flexibility and the same features as others. Find one that works for your goals. Here are some features to consider:

Allows you to create budgets for all of the categories you need to. Look for a software program that gives you the flexibility to add spending accounts (sometimes in virtual envelopes) and customize your needs.
Choose a program that allows you to track assets, including financial accounts. This way, you not only see what is going out each month but can track what you are making on your investments, too.
Look for a program that provides you with an easy to use setup wizard. Sometimes the hardest part of using budgeting software is getting it set up to work right for your needs. Some programs just have a better method for getting you set up and teaching you how to use the program than others do.
Be sure you can import data. While older accounting-style programs allowed consumers to enter data as it was spent, today’s best budgeting programs connect to your financial accounts, including your checking and savings accounts and download the data from them for you. This means you can easily keep track of what is happening without having to spend a lot of time inputting data yourself.
Choose a program that gives you a visual description of what is happening with your money each month. Some programs will produce charges, graphs and various methods to view the account so as to show you where your money is being spent. Some programs will recognize purchases at restaurants and tally those into one section of a pie chart while placing gasoline purchases in another.

Many of these programs have cut back on the costs associated with these programs. You no longer need to have an accounting degree to use these programs.

Making it Work

When it comes to buying budgeting software, choose a product that fits you properly. That is the easy step. The harder step is to use the program properly, which means consistently. You will want to invest in a program that provides you with tools, reminders and automatic payment setups so you can minimize the amount of time you need to use the program. However, make a point to using the program at least one time per week to manage your finances.

For many people, a budget can change a financial life. It can give you goals to aim for and help you to know how much you are spending, really, on each of the purchases you make each day. Factor in the benefit of adding this type of program to your financial management system. It may prove a significant advantage over balancing your checkbook or just “managing” you funds in your mind.

Budgeting
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Accounting Abuses

It is sometimes difficult to understand how, if 1) there are standard accounting rules that all companies must follow, and 2) accounting standards are regulated and 3) certified public accounting firms oversee that companies report their financial results according to these rules and standards, how some companies have been able to publish financial results that did not show a true picture of the company’s financial success (or lack of it).

The reason the last few years’ phenomenon of flagrant accounting abuses by major corporations such WorldCom, Enron, Global Crossing, Adelphia, and Tyco were able to occur is that accounting rules are open to interpretation. The many ways to portray expenses and revenues were exploited by creative accounting practices in order to mask losses. The figures did not lie; they were just hidden so well that they became silent. Some of these abuses may simply be questionable; some are actually fraudulent.

One way to hide losses is to depreciate assets more slowly. If a major capital asset, such as a oil rig has a cost of $10 Million and is normally depreciated over 10 years, each year it would represent an expense to the company of $1 Million. If, however, the company were to change the depreciation schedule to 20 years, the annual expense would be reduced to $500,000, thus increasing the company’s profit, or at least, reducing its losses. Although this might be considered legal, it would not be ethical if the true life of the oil rig was really only 10 years. At the tenth year when it had to be replaced, the cost would not yet have been fully covered.

A similar abuse, but one that is clearly illegal, is to capitalize, that is spread out over a period of years, ordinary expenses that occur in a single year. This appears to be one of the abuses committed by Worldcom. A company should spread the cost of a major capital item out over several years because it will be used over all of those years; it is a question of interpretation how many years should be used as a guideline. However, telephone bills, payroll expenses, monthly rent, any items that are related to a current period must be expensed to that period and may not be spread out over time to make it appear that income is sufficient to cover expenses.

Some companies that trade in energy contracts have established “round trip” trades in these contracts wherein no underlying transaction occurred, but served only to boost the apparent revenues of the company. Global Crossing was investigated by the SEC for the same type of accounting trick wherein it did back and forth swaps of fiber-optic capacity, while the capacity never changed hands.

Another way to presenting financial performance more favorably is to conceal some of the company’s debt. Selling debt to off-balance sheet entities, prepaid transactions where the funds are reported as deferred revenue rather than debt, synthetic leases and derivatives may all serve to increase capital without reflecting debt on the company’s financial statement.

The Securities and Exchange Commission, the various accounting standards boards and many other financial regulating entities are constantly reviewing how to monitor and control these types of abuses. Innovative and often unethical accounting professionals seem to stay one step ahead of them.

Accounting
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Understanding Corporate Finance

The Basics
Corporate finance is the body of knowledge that dictates the decisions a company makes about its finances. The scope and implication of this is very broad, since just about any decision that affects the company is ultimately a financial decision. First of all, the company has to define its objectives. The company is designed to make a profit through the sale of its products or services. The objective is defined as: which product(s), which service(s), to which market(s), with which products or materials and through which means. The decision makers in a company (board of directors, CEO, CFO and other senior managers) must address these financial decisions on a number of levels. There are three basic decision levels that all corporate finance attempts to address. They are the Financing Decision, the Investment Decision and the Dividend Decision.

The Financing Decision
Obtaining the right mix of initial capital is one of the first financial decisions to be made by a corporation. Deciding which type of financing matches the needs of the company, marketing the corporation for this financing and matching each type of financing to a specific need of the company in a way that such financing will be most intelligently used is crucial to long term success.

The Investment Decision
The company next decides upon its investment decision. This does not necessarily mean how it will invest its profits, although that forms a part of the investment decision; it also means how the company will decide to invest its resources. Its initial capital, whether built by investments by the principals, sales of shares, or debt must be allocated intelligently to the various needs of the business. Manufacturing infrastructure, salaries for sales, engineer or design personnel, research and development, marketing and many other areas compete for each investment dollar of a corporation.

The Dividend Decision
A corporation must then examine the decision of distribution of profits. Further investment in the assets of the company is important, especially in dynamic fields where new product development is the life line to continued success, but this must be balanced with the need for stability. Capital reserves, bonus structures, and of course, dividend distribution need to be funded if the company intends continue growth, keep vital staff and maintain market value.

The ultimate value of the corporation will be a reflection of how successfully it makes its decisions in each of these areas. If a firm chooses the proper allocation of resources, if the most appropriate types of financing are secured, and finally, if it can determine the proper proportion between how much gets plowed back into operations versus how much will be distributed as profit, the firm will build higher value than firms that make poor decisions in these areas.

Finance
basics
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