Example of a budget
Everyone will have financial goals in their lifetime. Whether it is to save for the latest iPhone, to buy your first car, or to buy your first apartment, knowing where to look for reliable financial advice and learning how to create a budget are important life skills that everyone should have.
Financial planning
Task 1
This can be done individually or in pairs.
a) Choose something you would like to save for and buy one day. It could be something for yourself in the short term, like a watch or something more expensive that you would like to have in the future like a car or apartment.
b) Search for three reliable sources of information that could help you reach your financial goal, that you can access in Canada. These could be:
- Bank websites
- Parents and friends
- Certified financial planning professionals
What information could you get from each source to help make a savings plan? How reliable is the information from each source?
c) Using at least one of sources from above, outline a plan and timeline to reach your savings goal. For instance, you might discuss with your parent how you could save enough money to buy a laptop. This might involve doing chores, or getting an after school job and putting away a certain amount each week. Your plan should include:
- What source you got the information from.
- What steps you will take to save the money.
- How long you think it will take to save the money.
To make sure that you reach your financial goals and make sure you stay on track on a daily basis, a budget can help that tracks your income and expenses to make sure you do not spend more than you earn.
Budgets
The best way to prevent yourself from spending more than you earn is to create a budget. A budget allows you to plan how you want to allocate your future income to cover your future expenses. Income refers to what you earn such as your wages. Expenses refer to what you spend on items or services such as rent, food and entertainment.
Task 2
This can be done individually or in pairs.
a) Choose a job that you might like to do one day and research the possible income for the first year in this job.
b) Research living expenses. In this scenario you will be renting accommodation. Decide what type of accommodation you would like to live in and what the rental fees would be. Research costs of all other possible living expenses such as electricity bills, water bills, gas bills, food, entertainment, clothing, pets, etc. You might research what type of living expenses people generally have.
c) Create a budget spreadsheet or table showing your income and all your expenses for one month. You may need to adjust your expenses to make sure your income can cover it all.
d) Consider the expenses that you have listed in your spreadsheet.
- What expenses are constant and necessary?
- What expenses are necessary but variable?
- What expenses are not necessary? If you deleted these, how much more would you save?
Factors that influence financial decisions
Many factors, including personal, familial, cultural, and societal factors, can impact financial decision making. Awareness of these factors help us make more informed decisions.
Three types of factors that may affect your financial decisions are:
- Factors relating to your family. e.g. How many dependents a person has.
- Personal factors. e.g. Whether a person wants to get married in the future.
- Factors relating to your community or society. e.g. How much money people in your community make, or the type of belongings they have.
Task 3
This can be done individually or in pairs.
a) In groups or pairs come up with three factors that may impact financial decision making for each of the three types:
i) Family factors
ii) Personal factors
iii) Society factors
b) Would any of the factors you have discussed impact your savings plan from Task 1 or budget from Task 2? How would you adjust your plan to accommodate these factors?