Budgeting

Starter questions....

What is budgeting?

Definition

•A budget is a plan of expected income, expected expenses, expected savings for a period of time.

Why Budget?

• In groups identify as many reasons WHY you would need to budget.

Why Budget?

• To prevent a person from forgetting about irregular but necessary expenditure eg; annual insurances or emergency expenses like car repairs.

• So you don’t run out of money before next pay day.

• To stop you getting into debt.• To avoid unnecessary spending.

Why Budget?

But the main reason is a positive one: it allows you to take control of your finances and make sure that your spending and saving allows you to achieve your goals – like getting that car, or going for a trip overseas.

Activity give an example of what you could do instead of spending money on the followingTakeaways Cook at home

New SMART phone   

New computer game

  

New school jumper   

$5 on lunch for school

  

$2.00 on soft drink everyday

  

$200 a month on heating your home

  

Budget Format

There are 4 main areas to consider when preparing a budget.1. Income2. Expenses (Essential and Non

Essential)3. Intended Saving4. Surplus OR Deficit

Terms and Definitions Matching Game

•HANDOUT to students match the terms with definitions

Terms and DefinitionsIncome = money received from employment, investments, or interest from depositsExpenses = an amount of money that is needed to pay for or buy something. Essential = something that is an absolute necessityNon Essential = spending on things that are a want rather than a need Saving = an amount of money that is not spent or usedSurplus = When income is greater than expensesDeficit = When expenses are greater than income

Identify the following as either:Essential – spending on something that is an absolute necessity ORNon Essential - spending on things that are a want rather than a need 

1. Clothing2. Rent3. Car repairs4. Entertainment5. Petrol6. Cell phone

payments7. Food – grocery8. Food - snacks

Identify the following as either Essential or Non Essential Expenses ANSWERS

•Clothing – Non Essential•Rent - Essential•Car repairs - Essential•Entertainment – Non Essential•Petrol - Essential•Cell phone payments – Essential•Food – grocery - Essential•Food – snacks – Non Essential

Group Brainstorm - on an A4 paper write as many different types of expenses that you can think of for yourselves and your familiesStudents to write these on the white board and then ask students which ones are ESSENTIAL. CIRCLE these ones. Does everyone agree??

Essential or Non Essential ActivityHANDOUT an activity sheet to each group. Students have 3 mins ONLY to categorize the expenses as either essential or non essential. When time is up the group must swap with the group beside them.

The winning team is the one with the most expenses correctly categorized.

How do you prepare a budget?

STEP 1 You need to list our income. STEP 2 You need to list all our expenses. STEP 3 You need to sort out our expenses into

Essential and Non- essential expenses. STEP 4 Now prepare the budget. It must balance

i.e. your income must equal your expenses or your expenses plus savings if we have money left over.

Budget Format ExampleIncome

Wages 400

Less Essential Spending

Rent 100

Petrol 50

Car repairs 40

Cell Phone payments 20

Food – Grocery 100 310

Less Non Essential Spending

Entertainment 50

Clothing 50

Food - Snacks 30 130

Total Spending 440

Balance (deficit) (40)

The aim is to Balance the Budget so there is NO deficit or surplus!

A deficit is when ......... are greater than income

A surplus is when .......... is .......... than expenses

QUESTION? What should you do to get rid of a deficit?

What should you do to get rid of a deficit ANSWERYou must reduce your non essential expenses

What do you do with a surplus?

What do you do with a surplus?You can either:

▫increase your savings ▫increase your spending.

However in life it is more beneficial if you increase your savings!

Maths note....

Sometimes, we will be approximating weekly figures rather than worrying about getting things to be mathematically perfect. So if you are given monthly figures and need to convert to weekly figures, divide by 4.

If you are given a yearly (annual) figure – What would you divide it by to get a weekly figure?

Do Now – Personal Budget for Jerome KamoHANDOUT a copy of the budget to each student. Students to replace the ?’s with the correct figures

Your turn! Prepare a WEEKLY budget for Reginald SinghReginald’s main job pays $500 a week. His rent per week is $120 and he spends $75 a week on food. His bus fare per month is $100 and his cell phone expenses are $20 per month. He spends $50 a week going out with friends and another $25 a week on takeaways.

Create a budget for Reginald. How much is Reginald able to SAVE to balance his budget?

Weekly budget for Reginald SinghIncome $ $ $

Wages 500

Less Essential Spending

Rent 120

Food 75

Bus Fares 25

Cell Phone payments 5 225

Less Non Essential Spending

Entertainment 50

Food - Takeaways 25 75

Total Spending 300

Budget SURPLUS 200

SAVINGS (200)

Balanced BUDGET NIL

Prepare a budget for the Leota Family

HANDOUT a copy of Leota Family,

Each student to prepare a budget for the Leota Family.