Budgeting involves planning spending based on earnings. People should save 10% of net pay and spend the rest on expenses, with no more than 30% of take-home pay going to housing costs. When preparing a budget, one determines monthly income and expenses, savings plans, and creates a monthly statement. Income sources include regular pay, bonuses, and benefits, while expenses are fixed costs like rent and variable costs like food and recreation. People should have a reserve of 2-3 months' pay for unexpected costs.

1. Lesson 41 & 42
Budgeting
Text Reference: Chapter 1, Section 8
$ Budgeting can be defined as a PLAN for spending your money. It is used
to help people or business manage their expenses relative to their total
earnings.
$ Financial planners suggest you pay yourself 10% of your net pay. This
10% should be used for a savings plan or investments. Once you have
paid yourself, the rest of the income to pay your expenses.
$ Total housing costs should not be more than 30% of your take home pay.
This includes all the costs of living in a home (rent, mortgage payments,
utility bills, maintenance, repair costs and taxes.
What to do when preparing a budget:
$ Determine your MONTHLY average income.
$ Determine your monthly fixed and variable expenses.
$ Determine a savings plan (for a reserve fund and investments).
$ Prepare a monthly budget statement.

2. $ To set up a budget you first must estimate your income. It is
important that you do not overestimate. If you are unsure, then
underestimate.
 Income includes:
 Regular income (net pay)
 Other Income
Bonuses
Tips
Overtime payments
Tax refund
 Additional income
Child tax benefits
Pensions
Insurance benefits
Interest payments
$ Analyze your current regular spending habits to estimate your
expenses.
 Fixed Expenses – definite expenses that must be paid at regular
intervals.
 Mortgage or rent
 Personal Loan
 Telephone
 Hydro
 Car Insurance, taxes that are paid yearly but need to be
budgeted for monthly.
 Variable Expenses – expenses that vary from month to month
 Food
 Clothing
 Recreation
 Vehicle maintenance
$ Reserve Fund - It is a good idea to have a reserve of two to three month’s
pay to meet unexpected expenses that may occur. If your expenses exceed
your income, you will use the money from the reserve fund to cover the
extra expenses.
$ Budgets – can be set up based on any time period you wish but budgets
usually coincide with your pay periods. For these lessons budgets are set
up on a monthly basis.
Assignment: Exercise 41 – Q 1 to 13
Exercise 42 – Q 1 to 13