Notes
Planning
- A need is required for health, safety or work; a want is not. A budget compares income with expenses using net pay.
- Fixed expenses stay the same (rent); variable expenses change (food, fun). A surplus means income exceeds expenses; a deficit means expenses exceed income.
The 50/30/20 rule
- 50% of net income to needs, 30% to wants, 20% to savings and debt repayment. It is a flexible guide.
- Example: $2,500 net income gives $1,250 needs, $750 wants, $500 savings.
Tracking and goals
- Tracking spending shows where money really goes. Percent of income $\displaystyle = \frac{\text{category}}{\text{income}}$.
- SMART goals are specific, measurable, achievable, relevant and time-bound. Monthly saving $\displaystyle = \frac{\text{goal}}{\text{months}}$.
Emergency funds
- Save about 3 to 6 months of essential expenses in a safe, accessible account to avoid borrowing when something unexpected happens.
Topics in this unit
Each topic has its own short notes and practice.
Practice
$0.20 \times 2400 = 480$.
Grocery spending changes from month to month.
Expenses exceed income by $2150 - 2000 = 150$.
$3 \times 1800 = 5400$.
Emergency money should be safe and accessible.
$\displaystyle \frac{900}{6} = 150$.
Free response
Write your answer first, then open the scoring guide.
Free-response question
Marcus has a net income of $2,000 per month. His spending is: rent $800, food $300, transportation $200, entertainment $400, and streaming and apps $100.
(a) Find his total spending and whether he has a surplus or deficit.
Show the answer and scoring guide
$800 + 300 + 200 + 400 + 100 = 1800$. Income $2,000 minus spending $1,800 is a surplus of $200.
Check off the points you earned:
(b) Using the 50/30/20 rule, how much should Marcus have for needs, wants and savings? Which of his expenses count as needs?
Show the answer and scoring guide
Needs $1,000, wants $600, savings $400. Rent, food and transportation ($1,300) are needs.
Check off the points you earned:
(c) Compare his needs spending to the guideline and suggest one change.
Show the answer and scoring guide
His needs are $1,300, which is $300 above the $1,000 guideline (65% of income). Entertainment, streaming and apps are wants totaling $500, which is under the $600 guideline. He could keep wants where they are and look for ways to lower needs, such as cheaper transportation, and put his $200 surplus into savings.
Check off the points you earned: