Copyright Goodheart-Willcox Co., Inc. 38 Chapter 2 Personal Financial Planning Budgeting for Savings In order to have cash available for unexpected emergencies, savings should be included in your budget. Pay yourself first is a personal financial strategy that can help you save money. By paying yourself first and putting money aside for saving, you begin building wealth for your future. The term wealth means an abundance of money and other assets. Saving money is needed for major purchases and medium- and long- term goals. It is also necessary to save money to use in the event of a financial emergency. An emergency fund is an amount of money that can be easily accessed in case of a job layoff, illness, or unexpected expense. It is a good idea to include savings as a fixed expense in your budget. For example, if you wish to take a camping trip in five months, estimate how much money you will need. If the trip will cost $360, figure out how much you will need to save per month or per week to pay for the trip. • To calculate the monthly savings required, divide $360 by 5. You will need to save $72 each month. • To calculate the weekly savings required, divide $360 by 20, the number of weeks in five months. You will need to save $18 per week. This method can be used to plan for any expense if you know the amount you need and when you need it. When you build savings into your budget, you will be better able to deal with unexpected expenses and to reach important goals in your future. Paying yourself first is a strategy that can be used throughout your life span to help assure you have money for the things that you need. Charitable Giving as an Expense A charity usually refers to an organization that aids those in need, such as the homeless or victims of natural disasters. A charitable contribution is a donation of money or other property. According to the IRS, “a charitable contribution is a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value.” One benefit of making charitable contributions is a tax deduction on an individual’s income tax return. Tax deductions can be made on an income tax return if the contribution meets specific standards set by the IRS. Taxes and tax deductions are covered in detail in Chapter 3. Another benefit of charitable giving is the feeling of fulfilling social responsibility. Social responsibility is behaving with sensitivity to social, environmental, and economic issues. Philanthropy is the act of giving money, goods, or services to meet the needs of others and supporting organizations and causes that are important to an individual. Being socially responsible, or philanthropic, is also known to make individuals feel happier and relieve stress. Donating time or talent to an organization may FashionStock.com/Shutterstock.com Philanthropy can be a donation of time as well as money.