MM - Budgeting [LESSON]

Budgeting

In this lesson, we will explore the essential elements of creating a budget as well as financial planning strategies that can be applied to common workplace scenarios.

Knowledge Point

Please answer the following questions before starting today’s lesson.

Image with Would You Rather? Choices

 

Budgeting Basics | Video

❓ Why is budgeting important?

As you watch the short video, answer the following questions:

  1. Explain the importance of budgeting in relation to income and expenses. Give an example.
  2. How does Luna, the Budget Fortune Teller, explain the concept of budgeting to Jen?
  3. Describe how Jen initially determines what she can afford to spend.
  4. What does Luna mean when she says, “No more spending until you give every dollar a job!”?
  5. Why does Luna emphasize the need for an emergency fund in the budget?

OER Source: Red Canoe Credit Union “Budgeting Basics Links to an external site.” Used according to terms of use.

A budget is a plan to help you manage your money. It details what you earn (income) as well as what you spend your money on (expenses). Some people shy away from creating a budget because they don’t want to spend the time or maybe because they don’t want to feel “guilty” for spending the money. In reality, however, creating a budget helps you feel less stressed and more confident about the money you spend. A budget also helps you make more informed decisions about your money.

Infographic about budgeting

Steps for Creating a Budget | Activity

Click the check marks below to read through the steps for creating a budget.

50/30/20 Rule | Activity

Consider using the 50/30/20 rule when building your budget. This is a simple, but effective budgeting strategy in which you allocate percentages of your income to three different areas: needs, wants, and savings. Let’s take a closer look at each; click the "i" to reveal the information. 

How do you Build a Budget | Video

Watch the short video below on the 50/30/20 rule. As you watch the video, answer the following questions:

  1. What is the purpose of listing the after-tax income in a budget?
  2. According to the 50/30/20 rule, what percentage of the after-tax income should be allocated for wants?
  3. How can someone adjust their budget to meet the 50/30/20 rule?

OER Source: Khan Academy “How do you build a budget Links to an external site.?” Used according to terms of use.

Now that you understand the basics of the 50/30/20 rule, let’s take a look at some examples of items that might be considered needs and examples of items that might be considered wants. Remember that everyone’s needs and wants can vary, but understanding the differences can help you manage your money.

An infographic comparing “NEEDS” and “WANTS”

Keeping track of your budget

There is no “right way” to keep track of your spending and budget. Instead, it is important for you to develop a system that works for you. Also, consider revisiting your budget, analyzing trends, and making updates, as needed. As time goes on, your income as well as your expenses and types of expenses might change. Therefore, it is important to update your budget to keep yourself on track. As a teenager, you might not have a lot of expenses, so you could hand-write your budget. Other options for creating and managing a budget include spreadsheet software, budgeting templates, and budgeting apps.

Financial Planning Strategies

Financial planning is important for both individuals and businesses. A strong financial plan ensures that goals are being met while providing options for overcoming financial and economic challenges.

Explore the infographic below to learn more about common financial planning strategies.

Infographic of Common financial planning strategies

Needs vs Wants | Activity

Let's see if you can sort the cards into the needs and wants columns.

Reflection

Differentiating between needs and wants as well as understanding the importance of savings is crucial for building a strong financial foundation. Remember that budgeting is not about restriction, but instead it is about empowerment!

Reflect icon with Gavsby

 

 

Ask a parent or a trusted adult about the various expenses they are responsible for each month. Ask them to help you develop a list of expenses (and possible amounts for these expenses) that you will need to budget for after you graduate from high school.

 

[CC BY-NC-SA 4.0 Links to an external site.] UNLESS OTHERWISE NOTED | IMAGES: LICENSED AND USED ACCORDING TO TERMS OF SUBSCRIPTION - INTENDED ONLY FOR USE WITHIN LESSON.