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Grade 7 EMS: Budget
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Budgets
Grade 7 EMS
Budgets
Some people are not very good at controlling how they spend their money. They often go out and spend all of it as soon as they get it and then find that they later run out of money for the things they desperately need. A very important skill is to learn how to manage your money so that you can make it stretch further.
Defining Budgets
A budget is a plan of how much money you have and how you spend it. We define a budget as an estimate of future income and expenses
Why are budgets important?
Why?
• A budget is an easy way to keep control of your finances: you know exactly how much you have spent and still need to spend.
• The aim of a budget is to help you stay out of debt and to spend your money wisely.
• A budget is also used to help you save money.
• A budget helps you to identify areas where you spend too much money.
• A budget helps you decide which items are more important to buy and when you should buy them: for example, you should make sure that you have enough money for food before you spend money on clothing and luxury items.
• A budget changes as income changes, and as needs, wants and priorities change.
Who prepare budgets?
Who?
- Individuals
- households
- businesses
- government and non-profit organizations are examples of groups that prepare budgets.
- Different kinds of budgets will be prepared for the different types of groups. A budget can be prepared monthly, quarterly (every 3 months), every six months or annually.
Things to remember:
Things to remember
• A budget must be realistic.
• A budget must be flexible in case you need money for an emergency, such as household repairs, a new tyre for your car and so on.
• You can adjust your budget as you go along, e.g. if you do not spend all your entertainment money for that month you can either save it or add it to another item on your budget, like food or clothing.
• A personal budget is usually planned for every month.
• A budget for a business will usually cover a number of months or even years
Personal Budget
Personal Budget
It is essential to have a personal budget. It puts you into control of your money and helps you to set goals. It inspires a culture of planning and saving. Saving is an investment in your future. A budget can be a plan for as short a time as a day or a month, or it could be for a year or for a number of years. You can think of a budget as a plan for what is to be done with an income.
Have a look at the example of a personal budget
Have a look at Donovan's budget and answer the questions
Donovan's budget
Answer the following questions:
Questions
1. Explain what you have noticed about Donavan’s budget.
2. Is it a balanced budget? Explain why you think so.
3. Is Donavan spending more or less than he earns?
4. What would you suggest he could do to manage his money better?
5. What do you think he should stop spending money on? Why?
6. Should he be saving any money?
7. What will happen if he suddenly needs money for an emergency?
Business Budget
An important part of a business is the budget. It is essential in the planning and financial management of any business. Income is the money that a business receives from donors, fund-raising or selling goods and services. Expenses are all the monetary costs of daily running a business. The budget of a business shows the expenses and income for a certain period. The budget is vital in an effective business.
Purpose
Purpose
A budget has many purposes besides planning. Budgets should be accessible to staff members so that they know if funds are available for them to do their work. It allows limits to be set and goals to be realistic. Problems and shortfalls can be identified.
Transparency and accountability ensures that money is spent on what is budgeted for.
Concepts
Concepts
Expected income includes donor funds, donations, fundraising and sales. When more money comes into a business than is spent, there is a surplus. However, if more money is spent than what comes into a business there is a deficit. It is important in a budget to justify all amounts of money spent and received.
A business budget is compiled by someone who is well-informed about the finances of the business. This could be a committee, treasurer or director. When compiling the budget, all people involved must be consulted so that informed decisions can be made. When a budget is compiled, it needs to be approved by the management board. Independent auditors use the budget of a business when they check the business’s financial records. A budget can be compiled for a certain period of time or for a specific project.
Capital costs – buying vehicles, computers and printers, property.
Running costs – rent, maintenance of machinery, water and electricity, telephone accounts, internet network provider, couriers, vehicle maintenance, equipment rental, insurance, bank charges and legal fees.
Business expenses
Examples for business expenses
Operational costs – printing, research, material development, advertising, transport, catering.
Staff costs – salaries, medical aid, pension fund contributions, staff training, Unemployment Insurance Fund (UIF).