Chapter 2 – Budget

Name: ______Date:______

Terms:

A ______is a careful outline of the amount of ______a person or a family expects to receive and to spend.

A budget helps control spending in a number of ways:

1.  It helps a family plan to keeps its spending in line with its ______.

2.  It helps a family compare expenses to make sure that essentials are taken care of before luxuries are bought.

3.  It helps a family plan ahead and be sure that enough money will be available for expenses that will come up days, weeks, or even years later.

There are long-term and short-term budgets.

Short-term budgets: ______

______

Long-term budgets: ______

______

Discussion Questions:

1.  What values does a budget have for a family planning its financial affairs? Does using a budget have any disadvantages? If so, what are they?

2.  What are the differences between short- and long- term budgets?

3.  What kinds of information do you need in order to make out a monthly budget?

4.  What additional kinds of income might be available to someone who has not been able to save all the money needed for college education? Show how these additional sources might be included in a long-term budget.

5.  What items in the budget would change from month to month?


Section 2-1 Average Monthly Expenditures

______is a way for you to manage your money. Record you monthly ______, or the items you spend you money on. Start recording your expenses on a ______.

Example 1:

Sue and Bob Miller keep records of their expenditures. They want to know how much they spend each month (on the average). Here are their records for three months. What is their average expenditure?

STEP 1: Compute the average monthly expenditure.

A.  Find the sum of monthly expenditures.

$1,368.22 $1,365.00 $1,337.21

B.  Take the sum of monthly expenditures and divide by the number of months.

Sum of Monthly Expenditures Number of months


Section 2-2 Finding Average Incomes

Rule: To find average monthly income, multiply the net pay by the number of pay periods per year. Then divide this yearly income by 12 months.

Example A: Buddy is paid $617.09 biweekly. This term means that he is paid every other week. What is his average monthly net, or take-home, income?

STEP 1: Find his yearly income. Multiply his biweekly income by the number of pay periods per year.

STEP 2: Find monthly income. Divide yearly income by 12 months. Round your answer to the nearest cent.

Buddy’s average monthly net income is ______.

Practice

Find the average monthly income for each pay. Semimonthly means twice a month.

1. Biweekly $1,425.00 ______

2. Biweekly $ 135.96 ______

3. Weekly $ 570.21 ______

4. Weekly $ 128.75 ______

5. Semimonthly $1,300.47 ______

6. Weekly $ 159.32 ______

7. Biweekly $ 287.16 ______

8. Biweekly $ 312.10 ______

Example B: Vera works different hours each week and wants to estimate her average monthly income. These figures show her net pay for the last seven weeks.

$132.57 $176.95 $201.11 $148.76 $155.92 $154.09 $155.19

STEP 1: Find the average weekly income. Add the seven net pays. The sum of the net pay is ______.

STEP 2: Divide this sum by the number of pays. Round your answer to the nearest cent. The average weekly income is ______.

STEP 3: Compute the estimated yearly income. Multiply the weekly income by 52.

STEP 4: Divide the yearly income by 12 to find the average monthly income. Round your answer to the nearest cent. Vera’s average monthly income is ______.

Practice Find the average monthly income for each of the weekly net pays.


Section 2-3 Preparing A Budget

The first step in preparing a budget is to determine how much income is available. The second is to decide what kinds of ______, or costs you will have. It is helpful to list expenses in large categories.

Exercise A: List two kinds of expenses that can be includes in each category.

1. Housing ______

2. Clothing ______

3. Insurance ______

4. Entertainment ______

5. Health ______

Some consumer groups publish ______, or plans. One such plan is shown by the ______, or pie chart.

Review: How do we find the percent of a number?

1.  Find 20% of $140.00. ______

2.  Find 9% of $2,005.00. ______

3.  Find 5% of $870.00. ______

4.  Find 13% of $963.00. ______

Example: Michael has an average monthly income of $1,107.81. He uses the budget plan shown in the circle graph below. How much money does he budget for each expense?

Step 1: Multiply each percent by the amount available.

  1. Housing ______= ______
  2. Food ______= ______
  3. Clothes ______= ______
  4. Transportation______= ______
  5. Insurance ______= ______
  6. Gifts ______= ______
  7. Entertainment______= ______
  8. Savings ______= ______
  9. Health ______= ______
  10. Miscillaneous______= ______

TOTAL = ______

Step 2: Add the individual amounts to check for errors. The difference of 1 cent is due to rounding.


Exercise B: Follow the example and use the budget plan shown in the circle graph on the previous page for each of these monthly incomes. Find the amount of money that is to be budgeted for each category.

1) $ 810.15 / 2) $ 992.80 / 3) $ 1,128.03
4) $ 696.45 / 5) $ 713.28 / 6) $ 1, 037.69

Practice: Find the amount budgeted for each category. Use the percents shown in the example for each weekly income shown.

Weekly Income / 1) $416.50 / 2) $1,156.89 / 3) $661.40 / 4) $874.54
Housing
Food
Transportation
Gifts
Savings
Clothing
Entertainment
Insurance
Misc.
Health
TOTAL

Section 2-4 Preparing a Budget Sheet

How do we outline our total monthly expenses?

Monthly Living + Monthly Fixed + Monthly Share of Annual = Total Monthly

Expenses Expenses Expenses Expenses

Example A: The Millers use records of their past expenditures to complete the following budget sheet. What is the total of their monthly expenses?

Find the total monthly living expenses.

Example B: Tonia and Joe Smith have monthly living expenses of $875.00, monthly fixed expenses of $1,025.80, and annual expenses of $4,974.00. After calculating the Smiths’ monthly share of annual expenses, find their total monthly expenses.

STEP 1: Find the monthly share of annual expense.

Annual Expenses

12

STEP 2: Add up the expenses.

Practice: Find the monthly share of annual expenses and the total monthly expenses.

Monthly Living Expenses / Monthly Fixed Expenses / Annual Expenses / Monthly Share of Annual Expenses / Total
1. $1,200.00 / $1,600.00 / $4,800.00 / a. / b.
2. $ 885.40 / $1,458.90 / $3,658.20 / a. / b.