Budgets, income and expenditure statements

Understanding Budgets

A budget is a plan for managing income to cover expenses effectively. It helps individuals and households plan their spending and savings.

Income vs. Expenses

Types of Income and Expenses

• Fixed income/expenses: Remain constant over time (e.g. rent, salaries).
• Variable income/expenses: Change depending on circumstances (e.g. groceries, utilities).
• Occasional income/expenses: Occur infrequently (e.g. bonuses, medical emergencies).

Creating a Personal Budget

A good budget should:

• List all necessary items and anticipate future expenses.
• Be realistic and easy to follow.
• Prioritise essential needs (e.g. food, healthcare) over non-essential spending.
• Include a plan for savings and debt repayment.
• Maintain balance – income should be greater than or equal to expenses. If not, adjustments are needed.

Decision:

• Option 2 is cheaper, but the costs are similar. Option 1 is more convenient, so Douglas should choose it.

Key Observations:

• The household spends R1 160 more than it earns.
• Reducing water, electricity, and discretionary expenses can improve financial stability.

Activity: Family Budget

Scenario: The Philander family has two working adults and two school-going children. Their budget needs to be assessed for balance.

Expenses and Income Breakdown:

• Fixed expenses: Bond repayment, school fees, transport, municipal rates, car repayment.
• Variable expenses: Groceries, entertainment, savings.
• Income sources: Salaries, rental income.

Analysis:

• Monthly savings and adjusted expenses ensure financial stability.
• With good budgeting, the family remains within budget.