Hey there! Welcome to our Budgeting Basics course! We’re super excited to have you here. This course is all about helping you understand how to manage your money like a pro! Whether you're just starting to think about your finances or want to sharpen your budgeting skills, you’re in the right spot!
What is Budgeting?
First, we’ll dive into what budgeting is and why it’s so important for keeping your money in check.
Money Check-Up:
Next, we’ll take a look at a general budgeting scenario from our good friend James. You’ll learn how to figure out how much money James has coming in and what he spends his hard earnt cash on.
Set Your Goals:
We’ll help you set cool budgeting goals using the SMART way, which means your goals will be Specific, Measurable, Achievable, Relevant, and Time-bound.
Create Your Budget:
You’ll get to build your own budget that fits your needs, trying out different methods and tools that make budgeting easy and fun.
Stick with It:
Finally, we’ll chat about how to stick to your budget and make changes if your money situation changes
By the end of this course, you’ll be able to:
Know Your Budget Basics: Understand what a budget is and why it matters for keeping your money safe.
Check Your Money Situation: Calculate how much money you have and figure out your fixed (like subscriptions) and variable expenses (like snacks or outings).
Set Fun Goals: Make awesome short-term and long-term goals for your money using the SMART method!
Create Your Own Budget: Put together a budget that works for you, using different fun methods and apps.
Stay on Track and Adapt: Learn tips to keep your budget on point and how to change it when life throws surprises your way
What is the main goal of the Budgeting Basics course?
So, What Exactly is a Budget?
A budget is like a game plan for your money! Imagine it as a roadmap that guides your spending and saving, helping you reach your financial goals without getting lost along the way. Whether you’re earning money from a part-time job, an allowance, or occasional gifts, a budget helps you make the most of it by balancing what you want to buy with what you need to save.When you create a budget, you’ll start by listing your income—the money coming in.
This might include your pay from a job, money from family, or other sources. Next, you’ll track your expenses—the money you spend on things you enjoy, like movies, snacks, or shopping, as well as essentials, like transportation and savings for future needs.Think of it as setting up “buckets” for each type of spending or saving, so you know exactly where your money can go each month. Budgets also give you control: if you’re saving up for something big, like a trip or a new phone, your budget will help you figure out how much to put aside to make that goal happen!
Why is Budgeting Important?
Budgeting is super important for when you start earning money because it helps you:Take Control: You’ll know exactly how much money you have and where it’s going. No more guessing!Save for Fun Things: Want a new video game, clothes, or a special outing with friends? Budgeting helps you plan and save for those things instead of just spending all your money right away.Avoid Surprises:
When you keep track of your spending, you won’t be caught off guard when you run out of money before the month ends.Reach Your Goals: Whether it’s saving for a cool gadget or a fun trip, budgeting helps you plan and achieve your financial dreams!
Common Budgeting Myths
Time to Bust Some Myths!
There are some common misconceptions about budgeting that we need to clear up!
Myth: “Budgeting is Restrictive”
Truth: Some people think budgeting means you can’t spend money on fun stuff, but that’s not true! A budget actually helps you enjoy your money while still saving for what’s important. It’s all about finding a balance between spending and saving!
Myth: “I Don’t Earn Enough to Budget”
Truth: Even if you don’t have a job yet, budgeting is still important! You can practice budgeting with your allowance or gifts. Learning how to manage money now will help you when you start earning a paycheck!
Myth: “Budgets Are Only for Adults”
Truth: Budgeting is for everyone, including kids and teens! The earlier you start budgeting, the better prepared you’ll be when you begin earning your own money.
Myth: “If I Make a Budget, I Have to Stick to It Exactly”
Truth: Budgets are flexible! Life can be unpredictable, and you might need to adjust your budget from time to time. It’s about making it work for you, not about being perfect!
So, remember, budgeting isn’t about restrictions; it’s about making smart choices and preparing for your future. When you start earning money, you’ll be ready to manage it wisely! Ready to get started? Let’s go!
Which of the following statements is true about budgeting?
Assessing Your Financial Situation
Now that we know what a budget is, let’s dive into assessing your financial situation! This is all about figuring out how much money you have coming in (income) and how much you’re spending (expenses). To help us understand this better, let’s meet our friend James!
Meet James!
James is a 21-year-old university student who lives with his roommate. He works part-time at WhatsNextEducation, earning some money while he studies. Let’s follow James as he learns to manage his finances!
1. How to Calculate Your Total Income
First, let’s look at James’ income. He works part-time and earns $600 a week from his job. James also gets a bit of extra cash from his parents—let’s say $100 a week for groceries and other expenses.
Total Income Calculation:
Part-time job: $600
Money from parents: $100
Total Income = $600 + $100 = $700
So, James has a total income of $700 a Week.
2. Understanding Fixed vs. Variable Expenses
Next, we’ll help James figure out his expenses. There are two main types of expenses:
Fixed Expenses: These are the bills that stay the same each month, like rent or subscriptions. For James:
Rent: $400
Internet: $50
Phone bill: $30
Total Fixed Expenses = $400 + $50 + $30 = $480
Variable Expenses: These can change from week to week, like groceries, eating out, and entertainment. Here’s what James typically spends:
Groceries: $150
Eating out with friends: $80
Fun activities (movies, events): $60
Total Variable Expenses = $150 + $80 + $60 = $290
Now, let’s add up James’ total expenses:
Total Expenses = Fixed Expenses + Variable Expenses = $480 + $290 = $770
Assessing Your Financial Situation
Creating a Financial Snapshot
Now that James knows his income and expenses, it’s time for him to create a financial snapshot! This helps him see the big picture of his finances.
1. Tools for Tracking Income and Expenses
James can use different tools to keep track of his money. Here are some options:
Spreadsheets:
James could use a simple spreadsheet on his computer to list his income and expenses. He can create columns for each category and easily update it every month.
Pen and Paper:
If James prefers a classic approach, he could simply write everything down in a notebook! This can be just as effective, and it can help him stay engaged with his budget.
Putting It All Together
Now, let’s see what James has learned!
Total Income: $700
Total Expenses: $770
James notices he’s spending more than he earns. Uh-oh! This is an important moment for him. He needs to figure out where he can cut back or how to increase his income.
Tips for James:
Review Variable Expenses:
Maybe he can cut back on eating out or find cheaper entertainment options.
Consider Extra Work:
If he has time, James could look for a few extra hours at work or consider a side gig to boost his income.
By assessing his financial situation, James is now on the right path to making informed choices with his money! And now you can do the same when you start earning your own money. Let’s keep going! 🎉
Now that James has a good grasp on his income and expenses, it’s time to set some budgeting goals! Goals help him know what he wants to achieve with his money, whether it’s saving for something special or managing his day-to-day expenses better. Let’s dive in!
Short-term vs. Long-term Goals
1. Short-term Goals:
Short-term goals are things you want to achieve within the next few months to a year. They’re often smaller and easier to reach. Here are some examples for James:
Saving for a new phone:
James wants to save $300 for a new phone within the next six months.
Buying a concert ticket:
He wants to go to a concert next month and needs to save $100 for the ticket.
Saving up for a fancy dinner:
James wants to save an extra $50 this month for a fancy dinner with friends.
2. Long-term Goals:
Long-term goals are bigger dreams that take longer to achieve—usually over a year. Here are some examples for James:
Saving for a car:
James dreams of getting his own car and wants to save $5,000 over the next three years.
Building an emergency fund:
He wants to save up $1,000 in case of unexpected expenses, like car repairs or medical bills.
Studying abroad:
James hopes to study overseas in two years and needs to save $2,500 for the trip.
By setting both short-term and long-term goals, James can keep himself motivated and focused on his financial future!
SMART Goals Framework
To make sure his goals are clear and achievable, James can use the SMART goals framework. This means his goals will be:
Specific: The goal should be clear and detailed.
Measurable: James should be able to track his progress.
Achievable: The goal should be realistic and attainable.
Relevant: It should matter to him and fit into his life.
Time-bound: There should be a deadline for reaching the goal.
Putting It All Together:
So, James’ SMART goal for his new phone looks like this:
Specific: Save $300 for a new phone.
Measurable: Save $50 each month.
Achievable: He can do this without overspending.
Relevant: The phone is important for his daily life.
Time-bound: He wants to achieve this in six months.
By setting SMART goals, James is well on his way to achieving his dreams while staying on track with his budget! And you can do the same
Which of the following is an example of a SMART goal?
Now that James has set his budgeting goals, it’s time to create his budget! This is where all his hard work pays off. Let’s explore how he can build a budget that works for him.
Choosing a Budgeting Method
1. Overview of Popular Methods
There are numerous budgeting methods available, each tailored to suit different financial needs and lifestyles.
These methods are designed to help individuals effectively manage their money, achieve their financial goals, and maintain better control over their spending.
The next slide shows a couple of approaches that could be particularly beneficial for James as he learns to budget and manage his finances.
50/30/20 Rule:
This method splits your income into three parts:
50% for Needs: This includes essentials like rent, groceries, and bills.
30% for Wants: This covers things you enjoy, like entertainment, dining out, and hobbies.
20% for Savings: This is for putting money away for future goals, like James’ new phone or his emergency fund.
For James, if his total income is $700:
50% Needs: $350
30% Wants: $210
20% Savings: $140
Zero-Based Budgeting:
In the zero-based budgeting method, every dollar of income is given a specific job—whether it’s allocated for expenses, savings, or debt repayment—until the total equals zero. This ensures that James knows exactly where every cent is going and helps him manage his finances with precision.
For example, if James earns $700 in a month, he would begin by listing all his expenses, such as rent, groceries, transportation, and entertainment. He would then allocate funds toward his savings goals, like putting money aside for a new phone or building an emergency fund. Finally, any remaining amount could be directed toward debt repayment or additional savings. By the end of this process, every dollar has been accounted for, and his total planned spending matches his total income of $700.
This method not only gives James a clear picture of his finances but also encourages intentional spending and saving. It helps prevent overspending in one area while ensuring he steadily works toward his financial goals. By assigning each dollar a purpose, James can confidently track his progress and make adjustments as needed.
Step-by-Step Guide to Building a Budget
2. Walkthrough of Creating a Simple Budget
Let’s help James build a simple budget using the 50/30/20 rule:
Calculate Total Income:
James’ total income is $700.
Break It Down:
Needs (50%): $350
Wants (30%): $210
Savings (20%): $140
3. List His Expenses:
Needs:
Rent: $400
Internet: $50
Phone: $30
Total Needs: $480
Wants:
Eating out: $80
Entertainment: $60
Total Wants: $140
Savings:
Phone fund: $50
Emergency fund: $90
Total Savings: $140
Adjust the Budget:
James notices his needs are more than his budget allows. He needs to adjust! He could find a cheaper place to live, cut back on groceries, or limit eating out to balance his budget.
Final Budget:
Needs: $350 (adjusted from $480)
Wants: $140
Savings: $140
By adjusting his budget, James can now see where he stands financially and ensure he meets his goals!
Using Budgeting Tools
Recommendations for Helpful Resources
To make budgeting easier, James can use some awesome tools.
Spreadsheets:
Google Sheets or Microsoft Excel can help James create a custom budget template. He can easily update his budget each month and track his progress.
Pen and Paper:
If James likes to write things down, a simple notebook can work wonders! He can create sections for income, expenses, savings, and goals.
Apps:
Budgeting apps can simplify James' financial management by tracking expenses, categorising spending, and providing real-time updates.
They also allow him to set savings goals, receive notifications, and monitor his progress with ease
Putting It All TogetherBy choosing a budgeting method, walking through a step-by-step process, and using helpful tools, James is now ready to manage his money like a pro! He has a clear plan, understands his financial situation, and knows how to track his progress. And you can do the same! Let’s get budgeting!
Now that James has successfully created his budget, it’s time to focus on how he can stick to it and turn it into a sustainable habit. While creating a budget is an important first step, following it consistently is where the real challenge begins. Sticking to a budget requires discipline, planning, and the flexibility to make adjustments when necessary.
James might encounter unexpected expenses or feel tempted to overspend in certain areas, but by using the right strategies, he can stay on track and maintain control over his finances. Developing a mindset focused on his goals, tracking his progress regularly, and making small but meaningful changes to his habits will help James turn his budget into a powerful tool for achieving financial stability and success. Let's explore some tips and techniques to ensure he sticks to his budget and continues moving toward his financial goals
Tips for Maintaining Your Budget
1. Set Reminders:
James can use his phone or calendar to set reminders for important budget dates, like when his pay checks come in or when bills are due. This helps him stay organised and ensures he does not miss payments.
2. Track Spending Regularly:
James should check in on his budget weekly or monthly. By tracking his spending, he can see where he’s doing well and where he might need to cut back. Apps or spreadsheets can help him easily log his expenses.
3. Find an Accountability Buddy:
James can team up with a friend or family member to share his budgeting goals. They can encourage each other, share tips, and even check in on each other’s progress. Having someone to talk to about finances makes it more fun and motivating!
4. Celebrate Small Wins:
Every time James reaches a savings goal or sticks to his budget for a month, he should celebrate! This could be treating himself to a small reward, like a movie night. Recognising achievements keeps him motivated.
5. Stay Flexible:
Life can be unpredictable, so James should remember that it’s okay to make adjustments. If he finds he’s spending more on groceries one month, he can shift funds from entertainment to cover it without stressing out
Adjusting Your Budget
1. When to Revise Your Budget:
James should review his budget regularly, especially when there are big changes in his life, such as:
New Income:
If he gets a raise or starts earning more money from a side job, he might want to update his budget to reflect this extra income.
Change in Expenses:
If his rent goes up or he starts paying for a new subscription, he’ll need to adjust his budget accordingly.
Changes in Goals:
If James decides he wants to save for a new goal, like a holiday trip, he may need to allocate more money toward savings.
2. How to Revise Your Budget:
When James needs to revise his budget, here’s what he should do:
Review Income and Expenses:
Look at how much money is coming in and where it’s going. He can list out all his fixed and variable expenses again.
Identify Areas to Cut Back:
If he needs to save more, he can see where he might reduce spending, such as cutting down on entertainment or eating out.
Update Goals:
Adjust his savings goals to make them realistic based on his new financial situation.
Example:
Let’s say James gets a part-time job over the summer that pays him an extra $300 a month. He can revise his budget to include this new income:
New Total Income: $1,000 ($700 + $300)
Adjust Savings Goal: Instead of saving $140, he might want to save $200 now, or he could use some of that extra income for fun activities
Putting It All Together
By using these strategies to maintain his budget and knowing when and how to adjust it, James can stay on track with his financial goals. It’s all about being proactive and flexible, so he can enjoy his money while working towards his dreams! And you can do the same! Let’s keep budgeting!
Why is it important for James to stay flexible with his budget?
What is a Budget?
We learned that a budget is a plan for your money that helps you understand your income and expenses. It’s essential for managing finances and achieving your goals.
Assessing Your Financial Situation:
We discussed how to calculate your total income and differentiate between fixed and variable expenses. We also saw how James tracked his financial situation.
Setting Budgeting Goals:
We explored the difference between short-term and long-term goals and learned about the SMART goals framework to help set clear, achievable financial targets.
Creating Your Budget:
We looked at popular budgeting methods, like the 50/30/20 rule and zero-based budgeting. We also went through a step-by-step guide to building a budget and discussed helpful tools and apps.
Sticking to Your Budget:
We shared tips for maintaining a budget, such as setting reminders and tracking spending. We also talked about when and how to adjust your budget as life changes.
As we finish our Budgeting Basics course, I want to leave you with some encouragement and a challenge!I challenge each of you to create your very own budget by the end of next week. Take everything you've learned today and apply it to your own financial situation. Even if you don’t have a job yet, imagine what your budget would look like if you did!
Here are a few steps to help you:
Calculate Your Total Income:
Think about any allowance, birthday money, or savings you might have. If you had a part-time job, how much would you want to earn?
List Your Expenses:
Include both fixed expenses (like any contributions you might make at home) and variable expenses (like outings with friends or snacks).
Set Some Budgeting Goals:
Imagine what you want to save for, whether it’s a new gadget, a concert ticket, or a special outing.
Stick to Your Budget! Remember to check in regularly and adjust as needed. You’ll be preparing yourself for when you do have a job!
Thank you all for being a part of this budgeting journey! Remember, budgeting isn't just about numbers; it's a valuable skill that empowers you to manage your money wisely as you move forward in life.
By learning to budget now, you're setting yourself up for success in the future. Whether you’re planning for a new gadget, saving for a fun outing, or even preparing for future studies, having a budget will help you make informed decisions and avoid financial stress.
So, let’s make those budgets happen! Start thinking creatively about how you can allocate your income and expenses, and don’t be afraid to dream big. With a solid plan in place, you’ll be well on your way to achieving your goals.
You’ve got this!
Which of the following is NOT a reason why budgeting is important?
Which of these statements about budgeting is TRUE?
If James is spending more than he earns, what is one way he can balance his budget?
What is an example of a long-term goal for James?
In the SMART goals framework, what does "Specific" mean?
What makes James’ goal of saving $300 for a new phone "Achievable"?
Why is it helpful for James to have an accountability buddy?
What should James do when he encounters an unexpected expense?
When should James revise his budget?