Week 1 Personal Finance and Google Sheets

Introduction

Muhammad and Asma are just one semester shy of graduating from Toronto Metropolitan University. Both are good friends and have supported one another a lot throughout university.  Muhammad is getting a bachelor of Creative Industries. He wants a job that comes with a lot of job security and opportunities for career growth.

Asma is getting a bachelor of Professional Communication, and hopes to eventually become a publicist and social media influencer. She has interviews lined up at nearby schools. Both Muhammad and Asma will need additional training to have the jobs they want, and they are already in debt for their educations.

Asma qualified for a student loan. She will owe about $30,000 of principal plus interest. Asma plans to start working immediately on graduation and to take classes on the job or at night for as long as it takes to get the extra certifications she needs. Unsubsidized, the extra training would cost about $3,500. She presently earns about $5,000 a year working weekends as a social media specialist and could easily double that after she graduates. Asma also qualified for a grant of around $5,000 each year she was a full-time student, which has paid for her rooms in an off-campus student housing unit.

Muhammad was awarded post-secondary funding from a scholarship and received some money from his relatives to support his education. He has also taken out a small loan from his credit union. He has been attending classes part-time year-round so he can work to earn money for university and living expenses. He earns about $19,000 a year working for catering services. Muhammad feels very strongly about repaying his relatives who have helped finance his education.

Asma has managed to put aside $3,000 in a savings account earmarked for clothes and gifts.  Muhammad has sunk all his savings into tuition and books, and his only other asset is his compact car, which has no liens and a trade-in value of $3,900. For both Muhammad and Asma, having reliable transportation to their jobs is a concern. Asma hopes to continue using public transportation to get to a new job after graduation. Both Muhammad and Asma are smart enough about money to have avoided getting into credit card debt. Each keeps only one major credit card and a debit card and with rare exceptions pays statements in full each month.

After graduation, Muhammad plans to rent an apartment. Muhammad also has a rent-free option of moving in temporarily with his brother. Asma feels very strongly about saving money to buy a home. Although still young, Muhammad is concerned about being able to retire—the sooner the better—but he has no idea how that would be possible. He thinks he would enjoy running his own creative consultancy as a retirement business one day.

Asma’s starting salary as a social media manager for a mid-sized company will be about $32,289, and as an entry-level branding consultant in a financial institution Muhammad would have a starting salary of about $38,000. Both have the potential to double their salaries after fifteen years on the job.

Muhammad and Asma have a lot of decisions to make, and some of those decisions have high-stakes consequences for their lives.

The great news for Muhammad and Asma is they have taken full control over their own personal finance planning, and have garnered strong financial literacies as a result. Their respective ability to plan their own financial futures has translated into work success. Their employers have noticed that their facility to use financial tools such as spreadsheet platforms like Google Sheets and Microsoft Excel. Their ability to use these tools as ensured they are valued team members in their work lives, and they are always at the table when their organizations bring on new clients, or are in planning discussions about their organizations’ one-year and five-year goals.

Quick Start: Google Sheets

Personal Budgeting Terminology

Expenses

An expense is something you pay out to survive (personally) or do business (when it comes to your business). Here are some examples of expenses:

• Fixed expenses are the same every month (or period) like rent.
• Fixed irregular expenses change every month (or period) like entertainment expenses. From a business perspective you have…
• Fixed business expenses are the same every month (or period) for your business, tracked separately, like phone bills.
• Fixed irregular business expenses change every month (or period) like headshot expenses.

Income

• Gross income is your top line; the income that comes in.
• Salary is the income that doesn’t change month over month.
• Project Income changes project to project, or contract to contract. Also called contract income.
• Passive Income you earn income such as dividends or interest on assets that you own/have invested in, i.e. from RRSP or in a TFSA or regular savings account.

Net Income

Net Income = Gross Income – Expenses

The difference between gross income and expenses is net income, which can be either a surplus or a deficit. Surplus is the income is more than expenses. Deficit is the income is less than expenses.

Areas for Saving

• Check your bills
• Negotiate better plans (banking fees and services, telephone, cell phone)
• Review your food costs (groceries, take out, buying lunch)
• Consider whether you need to own a car, a home or the latest high-tech gadget

Irregular Expense Accounts Reporting

This is why irregular expense accounts are so important!

Irregular expense accounts: money set aside to address unforeseen financial circumstances. It’s best practice to set up an irregular expense account for a rainy day. Best practices are to have at least 2-4 months of expenses in it.

Differences Through the Years – Variances

• Increase or decrease between two variables
• New value – old value = variance between the two
• New year variable – previous year variable = variance for the year

Differences throughout the years – Year-Over-Year Percentage Change

• Percent change over a year
• Shows the percentage the variable increased or decreased by
• Variance for the year / previous year
• OR (New year variable – previous year variable) / previous year

Her Goals:

Wants to one day be a famous actor

Her Approach and Attitude:

Sarita is a hard worker but also loves to have fun! She spends a lot of time network in the industry, i.e. attending parties, conferences and other events to meet other creatives.

Biography:

Sarita went to school for acting and graduated a few years ago. She actually booked her first national commercial last year! She also works part-time at a movie theatre to pay the bills (and the free movies don’t hurt either). She’s never been too good at the financing side of things but would love to learn more!

Our Goals:

Sarita would love to understand the industry and her work better by learning about budgeting

Exercise 1. Can You Help Sarita Create a Budget for 2021?

The current year is 2021. Sarita went to school for acting and graduated a few years ago. Last year she got an acting agent and has been auditioning way more frequently since. She even booked her first national commercial last year, she is still receiving payouts from it which come to $150 each month! She knows the path for acting is long so she continues to network and take classes when she can. To make her dreams a reality she needs to get good headshots which came to a total of $500 in January. She attended conferences to better herself one in January that cost $1,000 and in July that charged $400. The conferences are on top of acting classes that cost $250/month. Sarita is a member of a studio which helps her have better self tapes and pays $250/month.  She also works part-time at a movie theatre to pay the bills (and the free movies don’t hurt either) she earns $2,650 monthly.

She has no savings at the start of the year. Each month she pays rent with utilities included at $950, phone bill at $100, cable/internet at $100, prescriptions at $50, and groceries at $100. She also dines out spending $300/month, and spends $25 on cleaning. Her website designer charges $300/month for her professional website and she pays $50 a month for car rentals to get to auditions. Sarita is dreaming to go on vacation to make that a reality she is putting away $200 each month. Every other month (Jan/Mar/May/Jul/Sep/Nov) she pays maintenance/furniture at $200 and buys clothing at around $200. She goes to the dentist twice a year paying $350 each time (Jan/Jul) and the salon twice a year paying $200 each time (Jan/Jun).

Sarita wants to start organizing her finances in a budget but does not know where to start. She’s never been too good at the financing side of things but would love to learn more! Please use the information above to organize her finances into a budget using sum functions to calculate totals and subtotals. She has some questions about items she didn’t know where to put.

Looking at Sarita’s totals for the previous year (2020) compare them to her current budget (2021).

In 2020 She got a total of $1,800 for her commercial payouts. She needed to get good headshots which came to a total of $500 in January. And attended conferences that cost $1,400 for the entire year. The conferences are on top of acting classes that cost $3,500 for the year. Using a studio to have better self tapes was $3,000 for the year.  She also works part-time at a movie theatre to pay the bills (and the free movies don’t hurt either) she earned $25,000 for the year.

She has no savings at the start of the year. For the year she paid rent at $11,000, phone bills at $1,200, cable/internet at $1,200, prescriptions at $600, and groceries at $1,000. She also dines out spending $1,500/year, and spends $300 on cleaning. Her website designer charges $3,600/year for her professional website and she pays $600 a tear for car rentals to get to auditions. For the entire year she paid maintenance/furniture at $1,200, buys clothing at around $1,200, she goes to the dentist twice a year paying $700 each time and $1,400 at salons and personal hygiene.