Using Your Personal Budget
/Nice job! You’ve now learned about the importance of creating a budget that fits your personal needs. If you need a refresher on the basics of budgeting, feel free to look through last week’s lesson here. You’re now ready to create your budget. You may be saying to yourself, “Wait, didn’t you just say every budget was different and that it could be molded to my personal needs and wants? How am I supposed to know how to make a budget if every budget is different?” To get started in this process, think about your present spending habits. What kinds of things do you spend money on in the present? What sorts of things do you know you need to allocate funds toward in your budget? Is there anything you would like to purchase but never seem to have enough money for? These are the first questions you need to ask yourself when preparing and using your first budget.
Remember the qualities needed to create and use a personal budget. Firstly, your budget should include funds for basic expenses that occur regularly. We’ve covered this topic in last week’s lesson. These expenses include rent and utilities, among other consistent and important expenses. Part of your budget must also be allocated toward unexpected expenses. These include personal injuries and repairs or replacements for items you own, like your car or refrigerator. Lastly, a good personal budget allocates money towards savings. These regular and consistent savings can be used to pay for future planned expenses.
You may be thinking, “This is great, but when will I actually use these budgeting skills?” Great question. Consider the following scenario: you decide that you would like to purchase a brand new ten-speed bike. However, you don’t know how much money you can afford to spend or which store will offer you the best deal on a bike that fits your needs. This is where your budgeting skills will come in handy. By segmenting your budget into different categories, you know how much money you’ll need for your basic expenses and how much you are leaving aside for savings and unexpected expenses. You can then decide how much money you’re willing to take from the savings or unexpected expenses segment to purchase a bike. Another great thing about budgeting is if you don’t currently have enough funds set aside to buy a new bike right now, you can plan to set aside money in the future to save up for this bike. That way, you can still get the bike you want at the price you desire without overpaying or compromising your budget.
It’s important to keep your budget in mind while you shop. You may really want that brand new bike, but do you have enough money to purchase it at its current price? Have you gone to other stores or researched other brands of bikes to see which best fits your needs? By doing research and going to multiple stores to see their options, you may be able to get the item you want for a lower price than you expected. By comparing prices on similar products, you are creating more value for yourself and easing the burden you may be placing on your budget.
Be sure to try out the worksheet attached below for some practice with budgeting. See you next week!
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Worksheet and Answer Key:
https://youth.handsonbanking.org/wp-content/uploads/2019/08/InstructorGuide_MiddleSchool.pdf (pages 32-38)
Sample budget citation:
“What Is a Budget?” Personalfinanceimu, brightstarlearning.wixsite.com/personalfinanceimu/what-is-a-budget.
https://brightstarlearning.wixsite.com/personalfinanceimu/what-is-a-budget
Price comparison image citation:
Flat-icons.com. “'Black Friday - Astute Vol. 1' by Flat-Icons.com.” Iconfinder, www.iconfinder.com/icons/5473383/balance_compare_prices_icon.
https://www.iconfinder.com/icons/5473383/balance_compare_prices_icon
Additional Resources:
Prioritizing and Budgeting for Kids - https://www.youtube.com/watch?v=x0Xez_0BpvE
What is a Budget? - https://brightstarlearning.wixsite.com/personalfinanceimu/what-is-a-budget