Personal Finance / Unit 2: Budgeting
2.2 Building a Budget
Notes
A budget is a plan for how to use your income. Compare income to expenses.
- Income: money coming in (use net pay).
- Fixed expenses stay about the same each month (rent, a phone plan, loan payment).
- Variable expenses change (groceries, gas, entertainment).
- Surplus = income minus expenses when positive. Deficit = when expenses are greater than income.
- Example: income $2,000, expenses $1,850. Surplus $= 2000 - 1850 = 150$, so $150.
- Fix a deficit by cutting variable expenses or raising income.
Practice
Which is a fixed expense?
Rent is about the same every month; the others change.
A student earns $900 a month and plans $1,000 of expenses. What is the result?
Expenses exceed income by $100.
Monthly income is $3,000. Rent is $1,100, food $500, transport $300 and other expenses $700. How much is left?
Expenses total $1100 + 500 + 300 + 700 = 2600$. Left over: $3000 - 2600 = 400$.
Ready for more? Take the Unit 2 test.