Section 4: Create a Budget
1.12 Prepare and analyse a budget, determine the financial position, recommend appropriate action and present the analysis in tabular and graphic formats.
In this section students will gain an understanding of individual and household budgets and how to prepare and evaluate one including calculating totals and determining the financial position of the budget.
Students should have an understanding of the difference between needs and wants (see Section 1), the different forms of resources available to them as individuals and to a household (see Section 2) and how individuals and households spend their income (see Section 3).
- What is a budget?
- The value of budgeting
- Preparing a budget including format and layout
- Evaluating a budget
In this activity students will learn what a budget is and why making one is important. A budget is simply a plan of expected future income and expenditure and making a budget can help us to get what we need and want in life.
1. Explain to the class that they are going to do an activity where they will think about and discuss their understanding of the word ‘budget’.
2. Distribute one of the worksheets below to each student and invite them to complete it individually. Depending on the class you may decide to do the first part of the worksheet (what does the word ‘budget’ mean?) as a whole class activity.
You could begin by asking students if they have ever heard this word before and if so in what context (e.g. government budget, household budget etc.). Ask if anyone in the class ever sat down and came up with a plan about how to save or spend their money, e.g. to buy Christmas presents or for a holiday?
Explain all budgets (inclusive of personal budgets, household budgets, business budgets or Government department budgets) are a way of:
- keeping track of everything that is coming in and going out.
- planning how money is spent.
- helping to develop an awareness of money and how it is used in order to make planning for the future easier.
- keeping spending under control.
3. Ask students to form pairs, compare their work and decide which answers are the best for each of the boxes on their completed worksheets.
4. Invite feedback from a sample of pairs, recording student responses on the white/blackboard.
Student Worksheet: Think, Pair, Share
When this activity is completed provide feedback by facilitating a classroom discussion to identify the student’s answers and assess the factors that influenced their decisions.
In the previous sections we looked at income and expenditure plans separately and a household budget combines both of these.
In the worksheet below we are going to look at the Kerrigan household budget. We will assume they have €300 in cash at the beginning of January. Take this opportunity to facilitate a whole class discussion and ask the students to consider where this money may have come from.
Also discuss and illustrate the calculation of Net Cash, Opening Cash and Closing Cash figures with the students and ask them to determine the financial position of the budget (i.e. is it balanced, in surplus or in deficit?).
Student Worksheet: Kerrigan Household Budget
Watch this clip from episode 1 of the CCPC sponsored TV show ‘How to be Good with Money’ and get the students to examine how planning a weekly shop helps with budgeting and ask them to consider what other impacts it might have.
Ask the students to prepare a poster to represent their understanding of successful management of financial resources and this could be expanded to include an element of shopping ethically.
Household Budget Sample Question:
Below is a sample budget for the Weldon household for four months from September to December 2019.
Ask the students to read and assess the information provided under the planned income and planned expenditure headings.
They should then complete the blank budget using all the figures provided. They should also explain the term ‘Discretionary Expenditure’.
Student Worksheet: Weldon Household Budget
Student Worksheet: Weldon Household Budget Solution
Discussion & Reflections
In the above we looked at budgeting for individuals and for households and analysed information and presented it in various formats. What surprised you when it came to completing a budget for a whole household? How does keeping a budget and planning your expenditure help to avoid impulse buying?
We also completed a blank budget for the Weldon’s and gave a detailed explanation of discretionary expenditure. What did you find most difficult when it came to completing this sample question?
Linking Learning Outcomes
The students’ engagement and learning are optimised by a fully integrated experience of learning in Business Studies.
- 1.12 links to 1.2, 2.11, 3.4