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Financial Literacy - Budget Basics
Create a budget with your students and/or family. It’s a good exercise in understanding the value of money. Once the blanks on the budget are entered they will show the breakdown of how much money is coming in and where it goes. Successful businesses keep track of income and expenses. There’s no reason we shouldn’t keep track of our personal income and expenses.
The math required to create a budget is basically addition and subtraction. Therefore, there is no need to stress about the math. The more tedious part is gathering all the numbers for income and expenses. Sample worksheets are provided here as a guideline to provide to students or have them create their own from these ideas.
Creating a budget doesn’t sound terribly exciting but keeping one's financial house in order is a good feeling and provides a sense of control. In order to be successful, enter as much detail on the budget as possible. Once the numbers are entered subtracting expenses from income hopefully results in a positive and not a negative number! If the result shows more income than expenses, the excess can be targeted for saving or eliminating debt. If, on the other hand, expenses are higher than income, changes need to be made – either earn more or spend less or both.
If tracking expenses is challenging, a weekly expense log can be helpful.
Life cycle events, such as a wedding, require a separate budget to keep expenses from getting out of control.
Set financial goals that are attainable and realistic. Make the goals “bite-size” so that success has a chance. If over spending is a problem, try to understand the reasons. Yes, enjoying life is important but declining an evening paid for by credit card which, if not paid off in full each month, means that evening will have to be paid for over a long time with interest accruing every month.
Once a budget has been created, it needs to be reviewed monthly to compare the budgeted numbers with the “actual” numbers. Are you on track or do you need to improve? The budget is a positive tool to reach goals. Accomplishing financial goals is exciting and motivational. Building a life of financial independence is priceless and a very worthy goal.
The only math you need to get started is ARITHMETIC.
As you get more comfortable you may want to start analyzing your budget with FRACTIONS, DECIMALS, and PERCENTS.
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