The level of debt among teenagers is rising at an alarming rate. One of the ways to help ensure you're always cashed up is to create a budget. A budget is a spending plan for a particular time period, whether it be a weekly budget or a monthly budget,that helps you keep track of your money and create realistic savings goals. People often use tables or spreadsheets to present their budgets in an easily readable format.
Once you subtract your expenses from your income,you know how much money you have left over. This is called your disposable income and it can be used as extra savings, spent on things you like or for something big you're saving for like a new laptop, an awesome pair of shoes or an investment portfolio.
Terminology
Income: Money that is earned.
Expenses: Money that is spent
Fixed expenses: costs that have to be paid where the amount does not increase or decrease. For example, if Serena pays $\$280$$280 per week rent, she will pay $\$280$$280 every week. This amount is fixed.
Variable expenses: costs that are incurred where the amount to be paid may change. For example, Liam may pay $\$125$$125 a week for groceries one week and $\$98$$98 another depending on what he buys. The amount can change.
Examples
Question 1
A weekly budget is shown in the table below:
| Income | Expenses | ||
|---|---|---|---|
| Earnings | $\$505$$505 | Mortgage | $\$147$$147 |
| Electricity | $\$23$$23 | ||
| Food | $\$64$$64 | ||
| Council Rates | $\$22$$22 | ||
| Insurance | $\$20$$20 | ||
| Water | $\$64$$64 | ||
| Clothing | $\$46$$46 | ||
| Entertainment | $\$56$$56 |
A)Calculate the weekly expenses.
Think: What would the total cost of the expenses be?
Do: $147+23+64+22+20+64+46+56=\$442$147+23+64+22+20+64+46+56=$442
B) Calculate weekly savings.
Think: The savings would be whatever is remaining after you subtract the expenses from the income.
Do: $505-442=\$63$505−442=$63
C) Calculate the percentage of income saved correct to $2$2 decimal places. Don't forget to include the percentage sign.
Think: We want to express the savings as a percentage of the income.
Do:
| $\frac{63}{505}\times100%$63505×100% | $=$= | $12.475$12.475 |
| $=$= | $12.48%$12.48% (2 d.p.) |
D) Calculate the percentage of income spent on mortgage payments correct to $2$2 decimal places. Don't forget to include the percentage sign.
Think: We want to express the mortgage as a percentage of the income.
Do:
| $\frac{147}{505}\times100%$147505×100% | $=$= | $29.108$29.108 ... |
| $=$= | $29.11%$29.11% |
E) Calculate the amount paid on the mortgage in one year.
Think: How many weeks are there in a year?
Do: $147\times52=\$7644$147×52=$7644
Sometimes budgets are done weekly, bi-weekly or for larger businesses even yearly. The following terms may help you with questions relating to budgeting and finance.
Week - is made up of $7$7 days.
Fortnight - is made up of $2$2 weeks, and hence $14$14 days.
Month - sometimes you need to know how many days in each month a calendar can help you here if you can not remember. Sometimes we also round a month to have an average of $4$4 weeks, but nearly all months have more than $4$4 weeks if we wanted to be exact.
Quarter - the term quarter actually means a quarter of a year. This is $12\div4$12÷4 months = $3$3 months.
Year - is made up of the $12$12 months, or $4$4 quarters or we sometimes round a year to say $365$365days. But as there are leap years every four years some calculations are made using $365.25$365.25 days per year. Seek further clarifications in the questions you are solving.
Question 2
Amerie pays rent of $\$239$$239 per week, and must budget for electricity and water costs of $\$533$$533 per quarter. How much should she put aside each week to cover these expenses?