Creating a Budget

Start by reviewing the definition of a budget with the students and explain that a budget can show how much money one has and how much money one spends. Make sure the students understand that a budget is a financial plan for saving and spending. Starts by having everyone create his or her own budget by taking a piece of paper and drawing a line down the middle of the page from the top to the bottom to make two columns. Have the students label one column “income” and the other “expenses”. Under the column labeled income, have them write down the different ways they earn money, and under expenses, have them list all of the things they spend money on.

Then, ask everyone to keep track of everything they spend for a month, asking them to make notes each time they receive or spend money.

Remind the students that there are factors that may cause changes in their total expenses or income that might not necessarily be reflected in their budget on a regular basis. An example of this is a birthday present, in which one might receive a gift of money. What is the best way to account for this in the budget? If something like this happens, have the students estimate their income or expense. To estimate means to make a good guess about the number. So, if a money gift totaled $12, then one would divide the number by 12, since there are 12 months in a year. This will make his or her budget more accurate. After the students have kept track of their income and expenses for a month, ask them to add the two numbers. This number will be the total income and expenses for one month. After they have completed this exercise, the students will have a better idea of where their money comes from, and where they spend their money on.

A monthly budget can look something like this:

The number listed on the bottom of the budget chart was calculated by subtracting the expenses from the income. If the number is positive, this indicates a surplus, meaning that more money was earned than spent. One can choose to either spend or save the surplus. If the number is less than zero, this means that expenses are more than income earned. This is called a deficit. If one has a deficit, one should evaluate spending habits and adjust them to make the total number greater than zero.

This exercise should demonstrate that a budget is a powerful tool to keep track of spending.