Name of teacher : Ms Mkiva
name of school :qhayiya secondary school
grade :10d
email address : zodwa19mkiva@gmail.com
date : 05 june 2021
topic :income and expenditure budget
Introduction
- Budget
- A budget is a plan of action to balance your expenditure with your income. it is usually displayed as a table of income items in one column and expenditure items in another. The last row of the budget shows the difference between income and expenditure. When income exceeds expenditure (your income is more than your expenses) then it is called a surplus. when expenditure exceeds income (your expenses are more than your income) then it is called a deficit or shortfall. Personal income is money that is paid to you, or that comes into your possession or bank account. Income can be paid to you in the form of a salary or wage for work undertaken, and it ranges from gifts or pocket money (e.g. from your parents) to bursaries or loans, savings, interest earned on your savings and income from inheritance.
Drawing up a budget is a good way to plan your expenditure based on how much money you expect to receive. Budgets are often estimates, because you cannot easily include unexpected expenses in a budget. However, you can plan to save some money that you can use in the event of an unexpected expense. Budgeting includes normal monthly budgeting and budgeting for particular expenses, such as an expensive item that you want to buy, a project or a trip overseas.
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There are three types of income: fixed, variable and occasional income.
Fixed income is an amount of money a person receives, which does not change with time. Salaries and wages are examples of fixed income.
- Variable income is an amount of money a person receives that changes over time, or changes according to the situation. Commissions and interest on investments or savings are examples of variable income.
- Occasional income is when someone receives money from time to time. Examples of occasional income may include gifts (e.g. money for your birthday) or inheritance (e.g. if a family member passes away and leaves money to you in their will).
Task
Douglas wants to travel from Cape Town to Durban to visit his cousin. His parents said that they can give him R500 towards the trip. He decides to draw up a budget to determine how much money the trip will cost. His uncle has offered to give him a lift home so he only needs to budget for the trip to Durban. He has R2 000 saved in his bank account. He wants to have some spending money left over when he gets there.
He phones Rainbow Buses to find out how much it costs to travel from Cape Town to Durban. They give him two options:
OPTION 1: Leave Saturday morning and travel straight to Durban. The trip costs R1 200 and he will need to pay for 3 meals at R30R30 per meal
OPTION 2: Leave Saturday morning and travel to Plettenberg Bay first. The trip costs only R400R400. He can then catch a bus on Sunday morning to Durban. This bus trip will cost R500. If he does this he needs to find a place to stay on Saturday night and budget for three extra meals (estimated at R30 each). He estimates that a Backpackers' Lodge would be the cheapest place to stay, at R200 a night.
|
Income |
Expenses |
Running total of money that he has |
|
|
Money from parents |
|||
|
Savings |
|||
|
Bus fare |
|||
|
Meals on bus |
|||
|
Accommodation |
Copy the above budget sheet and fill in the amounts for income and expenses in the correct columns for:
- Option 1.
- Option 2.
Process
To produce a budget you need to estimate what your income and expenses should be for a given month. You might already know exactly how much your income is, if it is fixed.
Your budget should help you to get the most out of your money and will help to enable you to have enough money to cover all your expenses.
There are several things you should aim for in your personal budget:
- It should list all of the items that are needed and should try to anticipate unforeseen expenses.
- It should be realistic, so that you can keep to it.
- It should focus on the high priority items (essential items such as food and health care). If too much of the income is spent on non-essential items and not on savings, your budget is going to become problematic in the future.
- An ideal budget should include a plan to save money for the future, or to pay off debts to allow for savings in the following months.
- It should be balanced. If your income is less than your expenses, then you need to revise it until the two sides balance. If your income is more than your expenses, then you should plan to save the extra money.
Evaluation
OPTION 1:
|
Income |
Expenses |
Running total |
|
|
Money from parents |
500 |
500 |
|
|
Savings |
2 000 |
2 500 |
|
|
Bus fare |
1 200 |
1 300 |
|
|
Meals on bus |
3×30=90 |
1 210 |
|
|
Accommodation |
0 |
1 210 |
(10 marks )
OPTION 2:
|
Income |
Expenses |
Running total |
|
|
Money from parents |
500 |
500 |
|
|
Savings |
2 000 |
2 500 |
|
|
Bus fare |
400 + 500 = 900 |
1 6001 600 |
|
|
Meals on bus |
6×30=180 |
1 420 |
|
|
Accommodation |
200 |
1 220 |
(10 marks )
Conclusion
The importance of budgeting cannot be understated. A budget, also known as cash flow, is arguably more important than the actual cash that you have in your bank and investment accounts. Your cash flow is what allows you to pay for everything (or not).
Without knowing your cash flow, you could be putting yourself into a bad financial situation and not even know it. You can only get by without knowing your cash flow for so long before you get into financial trouble, so make the time you know the flow of your cash. Budgeting should be something that everyone does, regardless of their financial situation.
Budgeting is a wonderful tool for managing your finances, but many people think it's not for them. Below is a list of budget myths—the erroneous logic that stops people from keeping track of their finances and allocating money in the best way.
Credits
Ms mkiva
Intrepid Wealth Partners, LLC, Madison, WI