BUDGET BASICS
What is a budget used for?
A budget helps a person plan and keep track of their income and expenses.
For many people, what is the main way they earn an income?
They have a job.
What is a need?
Something a person requires to live and meet their basic needs.
What is a financial goal?
Something a person plans to achieve with their money.
What is one reason why someone might create a financial goal?
To plan how they will use their money to achieve something they want.
What is the difference between income and expenses?
Income is money received, while expenses are money spent.
Income is money coming in and expenses are money going out.
What are the 2 main types of expenses?
Fixed expenses and variable expenses.
a) What is a want? b) Provide one example of a want.
a) Something a person would like to have but does not necessarily need. b) squishy, jewellery, watch, bag
When you set a financial goal you can set a SMART goal. What does the S and M stand for?
S = Specific M=Measurable
Jordan wants to save money for a holiday. Give one strategy they could use.
They could: set a SMART goal, make a budget, reduce unnecessary spending, save a set amount of money each month.
Jordan earns $3,600 from working at a veterinary clinic and another $900 from weekend work. What is Jordan's total monthly income?
$4500
Name 2 fixed expenses and 2 variable expenses.
Fixed expenses: Rent, health insurance, gym membership, phone and internet, Netflix
Variable expenses: Online shopping, going out for dinner, buying lunch, groceries
Jordan pays $1,750 each month for rent. Is this a need or a want? Why?
Need, because Jordan needs somewhere to live.
Jordan wants to travel to Japan. The trip will cost $8,500, and they want an additional $1,500 for emergencies. How much does Jordan need to save?
Jordan will need to save $10,000
Why might choosing a cheaper holiday make it easier for Jordan to reach their financial goal?
They would need to save less money, making the goal easier and potentially quicker to achieve.
Jordan earns $4,500 per month and has $3,950 in expenses. How much money does Jordan have left?
$550
Why is it important for a person to make sure their expenses are not more than their income?
If expenses are more than income, a person may need to borrow money, use savings or go into debt. It can also make it difficult to achieve financial goals.
Jordan spends $350 each month going to restaurants, movies and concerts. a) Are these needs or wants? b) Are these fixed expenses or variable expenses?
a) wants b) variable expenses
Why is it important for a financial goal to be SPECIFIC and MEASURABLE rather than simply saying, “I want to save money”?
A SPECIFIC and MEASURABLE goal gives a person a clear target to work towards and allows them to track their progress.
Give two ways a person could reduce their monthly expenses without changing their essential needs.
They could reduce restaurant visits, online shopping, takeaway coffee, entertainment or expensive brands.
Why might creating a budget be important for Jordan if they want to save for a holiday?
see how much money is available, identify expenses that could be reduced and work out how much can be saved.
A person receives a pay rise but continues to increase their spending. Explain why their financial situation might not improve.
Even though their income has increased, their expenses have also increased. If they spend most or all of their extra income, they may not have any additional money available for savings or financial goals.
Jordan spends $620 a month on food but usually chooses expensive brands. How can changing this spending improve their financial situation.
Jordan could choose cheaper alternatives and reduce food expenses, leaving more money available for savings.
A person sets a goal to save $6,000 but discovers that they cannot save enough each month to reach it by their deadline. What are 2 things they could change to make their goal more achievable?
They could reduce their expenses, increase their income, extend the deadline, or lower the amount they want to save.
How can a person's income and expenses affect their lifestyle.
A higher income or lower expenses can give a person more money to save or spend. Higher expenses or lower income can limit their choices and make it harder to achieve financial goals.