Making a Budget

Essential Question: “How do I create and follow through with a budget?”

Investigate: Budgeting and Goals

[Time Required: 10 minutes]

1. Reflect in your notebook about a time when you (or a friend) shared passwords for online accounts, such as Facebook and e-mail, with friends or boyfriends/girlfriends. Why did they decide to share their passwords? What are the risks involved? Did they have any qualms about sharing private information? Why/why not?
2. Reflect on what the words “identity, privacy, and theft” mean mean in relation to your life. Has your identity ever been compromised? Have you ever been victim of theft? How did those experiences make you feel?

Student Preparation: Understanding Cash Flow

[Time Required: 15 minutes]

1. Record in your notebook what you have spent money on over the last two days. Have you bought any food, clothing, or electronics? Have you gone to the movies with a friend, or bought any groceries or food?
2. There are several types of expenses: fixed expenses that are the same each month, such as a rent, phone, or car payment, and variable expenses, which change in price and frequency each month, like food or gas.
3. Label your purchases as fixed or variable expenses. How will your goals fit into these categories? If you want to buy a home, will your mortgage be a fixed or variable expense? If you want to take a vacation to Europe, will that be a fixed or variable expense? As you become more independent, more expenses will become fixed. Understand that knowing how money fits into these categories will help you build an accurate budget.
4. Have you earned any money this month (e.g., birthday cash, paycheck or allowance)? How do you keep track of what you make and what you spend?
5. Just like we need to track our outgoing expenses, we also need to track our incoming earnings. This process is called cash flow, and that we monitor it to determine a budget.
6. When you have a job, you earn what is called a gross income. This is the total amount of money you earn before taxes. State, federal and social security taxes are all deducted from your gross income (self-employed individuals also pay a self-employment tax). Once taxes are deducted from your gross pay, you are left with what is called net pay. This is the actual money you take home and the number you start with when building a budget. 

Challenge: Making a Budget

1. [Time Required: 35 minutes] 

   1. You will get a chance to study three different budgets showing fixed and variable expenses. Your challenge will be to decide which budget is the most effective in meeting the budgeter’s individual goals.
   2. Download the student activity sheet, Budget Busters: Who’s Breaking the Bank? and evaluate the budgets. Which budget is the most successful in meeting the budgeter’s goals. What adjustments could be made to meet the goal sooner?
   3. Download the student activity sheet, Budgets 101 you will now get a chance to create your own budget. 

Reflection

[Time Required: 5 minutes] 

Think back to the goals you defined earlier, and reflect in your notebook about how you will use budgeting to achieve these objectives. How much will you need to save? What fixed and variable expenses can you adjust in order to meet your goals sooner?