10 Budget case studies
Before the end-of-session quiz check what you’ve learned about budgeting.
Activity 7 Two monthly budgets
Draw up two monthly budgets for an 18-year-old who’s still at school but who has a part-time job.
- Draw up the budgets for the months of December and January and identify whether there’s a surplus of income over expenditure or an excess of expenditure over income.
- Explain the differences between the two months.
- What should be done to manage these variances in monthly budgets?
| December budget |
|---|
| Income from part-time work £240 |
| Pocket money £60 |
| Other income £100 |
| Spending on phone £45 |
| Spending on clothing £60 |
| Spending on socialising £80 |
| Spending on presents £120 |
| January budget |
|---|
| Income from part-time work £68 |
| Pocket money £60 |
| Other income £0 |
| Spending on phone £45 |
| Spending on clothing £40 |
| Spending on socialising £60 |
| Spending on presents £10 |
Feedback
| Monthly income | £ | Monthly expenditure | £ |
|---|---|---|---|
| Income from work | 240 | Phone | 45 |
| Pocket money | 60 | Clothing | 60 |
| Other income | 100 | Socialising | 80 |
| Presents | 120 | ||
| Total | 400 | Total | 305 |
| Surplus income | 95 |
January budget
| Monthly income | £ | Monthly expenditure | £ |
| Income from work | 68 | Phone | 45 |
| Pocket money | 60 | Clothing | 40 |
| Other income | 0 | Socialising | 60 |
| Presents | 10 | ||
| Total | 128 | Total | 155 |
| Excess spending over income | 27 |
December is clearly a month that sees more income generated and more spending too than in November.
This is to be expected. Schools are closed for the Christmas and New Year holiday for part of the month, and there’s an extra demand for labour because of the season. There’s greater potential to earn income from part-time employment. Income might also come in if Christmas presents are given in the form of cash from relatives.
On the other hand spending is likely to be higher too. You might buy Christmas presents and then there’s the costs of socialising during the festive season.
But despite these additional costs there’s still a surplus of income over expenditure for the month – caused mainly by the high part-time earnings during the holiday period.
The different outcomes for December and January (an excess of income over spending in December and the reverse in January) makes it clear that finances should be managed with a longer time frame in mind than just a single month.
Clearly the excess of income in December can be put into a savings account and then these funds can be used to subsidise those months where there’s a shortfall of income relative to spending.