GM Lesson 009 Preparing a Personal Budget
Learning Intentions
By the end of this lesson, students will be able to:
- Prepare a personal budget for a given income.
- Calculate total fixed and discretionary spending.
- Determine whether a budget has a surplus or deficit.
Note: It is significantly more beneficial to do the entire budget (and lesson) in a spreadsheet software or a grid book.
Prerequisites
Students should already be able to:
- Distinguish between fixed spending and discretionary spending.
- Add and subtract decimal amounts involving money.
- Interpret income and expenses over the same time period.
- Classify common expenses such as rent, transport, food, subscriptions and entertainment.
Key Idea Summary
A personal budget is a plan for income and spending over a given period of time.
A simple budget can be organised as:
| Category | Meaning |
|---|---|
| Income | Money received |
| Fixed spending | Regular expenses that are difficult to change quickly |
| Discretionary spending | Optional or flexible expenses |
| Total spending | Fixed spending plus discretionary spending |
| Surplus or deficit | Income minus total spending |
The main calculation is:
If the result is positive, the budget has a surplus.
If the result is negative, the budget has a deficit.
If the result is zero, the budget is balanced.
Direct Instruction and Worked Examples
Lesson Timing
Time Allocation
Time Allocation
Link to original
- Introduction, warmup and vocabulary: 5 minutes
- Direct instruction: 15 minutes
- Understanding checks: 5 minutes
- Exercises: 20 minutes
- Homework: 20 to 30 minutes outside the lesson it was taught in.
Direct Instruction
A personal budget should use a consistent time period.
For example, if income is weekly, then all expenses should also be weekly. If rent is fortnightly or monthly, it must first be converted into a weekly amount before preparing a weekly budget.
A personal budget often uses this structure:
| Item | Amount |
|---|---|
| Income | |
| Fixed spending | |
| Discretionary spending | |
| Total spending | |
| Surplus or deficit |
The total spending is calculated by:
The surplus or deficit is calculated by:
A budget is financially stronger when income is greater than spending.
Worked Example 1: Preparing a Weekly Budget
Mia earns $780 per week from casual work.
Her weekly fixed expenses are:
| Fixed Expense | Weekly Amount |
|---|---|
| Rent | $310 |
| Phone plan | $25 |
| Public transport | $42 |
| Insurance | $18 |
Her weekly discretionary expenses are:
| Discretionary Expense | Weekly Amount |
|---|---|
| Takeaway food | $65 |
| Entertainment | $48 |
| Clothes | $35 |
| Streaming services | $14 |
Prepare Mia’s weekly budget and determine whether she has a surplus or deficit.
Solution
Fixed spending:
Discretionary spending:
Total spending:
Surplus or deficit:
Mia’s weekly budget is:
| Budget Item | Weekly Amount |
|---|---|
| Income | $780 |
| Fixed spending | $395 |
| Discretionary spending | $162 |
| Total spending | $557 |
| Surplus | $223 |
Mia has a weekly surplus of $223.
Worked Example 2: Identifying a Deficit
Noah receives $620 per week.
His weekly budget is:
| Expense | Type | Weekly Amount |
|---|---|---|
| Rent | Fixed | $340 |
| Phone | Fixed | $30 |
| Transport | Fixed | $55 |
| Groceries | Fixed | $110 |
| Eating out | Discretionary | $65 |
| Movies and games | Discretionary | $40 |
| Clothes | Discretionary | $35 |
Determine whether Noah’s budget has a surplus or deficit.
Solution
Fixed spending:
Discretionary spending:
Total spending:
Surplus or deficit:
Since the result is negative, Noah has a deficit.
Noah’s weekly budget is:
| Budget Item | Weekly Amount |
|---|---|
| Income | $620 |
| Fixed spending | $535 |
| Discretionary spending | $140 |
| Total spending | $675 |
| Deficit | $55 |
Noah spends $55 more than he receives each week.
Worked Example 3: Converting to the Same Time Period
Asha earns $1,860 per fortnight.
Her fixed expenses are:
| Fixed Expense | Amount |
|---|---|
| Rent | $520 per week |
| Phone | $60 per month |
| Transport | $85 per week |
Her discretionary expenses are:
| Discretionary Expense | Amount |
|---|---|
| Eating out | $140 per fortnight |
| Entertainment | $95 per fortnight |
| Clothing | $80 per fortnight |
Prepare a fortnightly budget. Use
Solution
Convert weekly amounts to fortnightly amounts.
Rent:
Transport:
Convert monthly phone cost to fortnightly cost.
Since
Fixed spending:
Discretionary spending:
Total spending:
Surplus or deficit:
Asha’s fortnightly budget is:
| Budget Item | Fortnightly Amount |
|---|---|
| Income | $1,860 |
| Fixed spending | $1,240 |
| Discretionary spending | $315 |
| Total spending | $1,555 |
| Surplus | $305 |
Asha has a fortnightly surplus of $305.
Understanding Checks
Understanding Check 1
A budget has income of $720 and total spending of $680.
Calculate the surplus or deficit.
Understanding Check 2
A student spends $430 on fixed expenses and $190 on discretionary expenses each week.
Calculate the total weekly spending.
Understanding Check 3
A person earns $900 per week and spends:
| Category | Amount |
|---|---|
| Fixed spending | $610 |
| Discretionary spending | $340 |
Determine whether the budget has a surplus or deficit.
Understanding Check 4
A phone plan costs $80 per month. Use
Find the weekly cost.
Understanding Check 5
Explain why all amounts in a budget should be converted to the same time period before making comparisons.
Exercises
Simple Familiar Exercises
Exercise 1
Liam earns $650 per week.
His weekly expenses are:
| Expense | Type | Amount |
|---|---|---|
| Rent | Fixed | $280 |
| Phone | Fixed | $25 |
| Transport | Fixed | $45 |
| Groceries | Fixed | $90 |
| Entertainment | Discretionary | $55 |
| Take-away food | Discretionary | $45 |
Calculate:
a. total fixed spending
b. total discretionary spending
c. total spending
d. the surplus or deficit
Exercise 2
Harper earns $740 per week.
Her weekly fixed spending is $470 and her weekly discretionary spending is $185.
Prepare a weekly budget table and determine whether Harper has a surplus or deficit.
Exercise 3
A student receives $480 per week.
Their expenses are:
| Expense | Type | Amount |
|---|---|---|
| Board | Fixed | $180 |
| Transport | Fixed | $35 |
| Phone | Fixed | $20 |
| Snacks | Discretionary | $ 45 |
| Games | Discretionary | $ 60 |
| Clothes | Discretionary | $ 75 |
Prepare a personal budget.
Exercise 4
A budget has:
Calculate the total spending and determine whether the budget has a surplus or deficit.
Complex Familiar Exercises
Exercise 5
Sophie earns $1,420 per fortnight.
Her expenses are:
| Expense | Amount |
|---|---|
| Rent | $480 per week |
| Phone | $50 per month |
| Transport | $65 per week |
| Groceries | $230 per fortnight |
| Entertainment | $120 per fortnight |
| Clothes | $90 per fortnight |
Use
Prepare a fortnightly budget and determine the surplus or deficit.
Exercise 6
Ethan earns $860 per week.
His budget is:
| Category | Weekly Amount |
|---|---|
| Rent | $360 |
| Groceries | $145 |
| Transport | $70 |
| Insurance | $35 |
| Phone | $28 |
| Eating out | $95 |
| Sport | $55 |
| Subscriptions | $22 |
a. Classify each expense as fixed or discretionary.
b. Calculate total fixed spending.
c. Calculate total discretionary spending.
d. Determine whether Ethan has a surplus or deficit.
Exercise 7
Amara earns $2,100 per fortnight.
Her fixed expenses total $1,480 per fortnight.
Her discretionary expenses are:
| Expense | Fortnightly Amount |
|---|---|
| Cafes | $155 |
| Streaming and apps | $48 |
| Shopping | $260 |
| Entertainment | $180 |
Prepare a fortnightly budget and determine how much money remains.
Exercise 8
A weekly budget has a deficit of $75.
The income is $690 and fixed spending is $520.
Find the discretionary spending.
Homework Problems
Homework 1
Create a weekly budget for the following person.
Income: $700 per week
| Expense | Type | Weekly Amount |
|---|---|---|
| Rent | Fixed | $300 |
| Phone | Fixed | $25 |
| Transport | Fixed | $50 |
| Groceries | Fixed | $115 |
| Entertainment | Discretionary | $70 |
| Takeaway food | Discretionary | $55 |
| Clothes | Discretionary | $40 |
Calculate the total fixed spending, total discretionary spending, total spending, and surplus or deficit.
Homework 2
Mason earns $1,760 per fortnight.
His weekly fixed expenses are:
| Expense | Weekly Amount |
|---|---|
| Rent | $430 |
| Transport | $75 |
| Groceries | $130 |
His fortnightly discretionary expenses are:
| Expense | Fortnightly Amount |
|---|---|
| Entertainment | $160 |
| Eating out | $140 |
| Clothing | $90 |
Prepare a fortnightly budget.
Homework 3
A budget has income of $840 per week.
The total fixed spending is $590 per week.
The person wants a surplus of $100 per week.
Find the maximum discretionary spending possible.
Homework 4
Ava receives $2,400 per month.
Her monthly spending is:
| Expense | Type | Monthly Amount |
|---|---|---|
| Board | Fixed | $800 |
| Phone | Fixed | $60 |
| Transport | Fixed | $220 |
| Groceries | Fixed | $420 |
| Entertainment | Discretionary | $260 |
| Shopping | Discretionary | $310 |
| Subscriptions | Discretionary | $45 |
a. Prepare Ava’s monthly budget.
b. Determine whether Ava has a surplus or deficit.
c. If Ava wants to save $300 per month, determine whether her current budget allows this.
d. If not, calculate the minimum reduction needed in spending.
Homework 5
Write a short explanation of the difference between a surplus and a deficit in a personal budget. Include one numerical example of each.