Budgeting - Organizing Your Income and Expenses

1.         Review the purpose of a budget. (Tracking monthly income and expenses to develop a    spending and saving plan, and achieve financial goals.)

 2.         Review the possible sources of income. (Salary or wages from employment, interest or   dividends, government payments, regular gifts, insurance payments, self-employment,         assets received, such as food stamps, subsidies, stipends)

 3.         Review the types of expenses.   Begin by having the participant make a list of the payments they make each month or regularly.  This can be through group brainstorming.

 4.         After a list of expenses is produced, ask students to indicate which expenses are:

             Level 1: Payments that must be made for fixed expenses or legally required.

                          (housing, utilities, loan/debt payments, insurance. Include your important                            priorities)

            Level 2: Regular expenses that can vary, but are normally incurred each month.

                          (food, auto expenses, school lunches, childcare, dues, etc.)

            Level 3: Those expenses that you can forgo with no substantial problem

                          (entertainment, clothing, food away from home, saving, gifts, personal

                          expenses)

Identifying each specific level or agreeing among the group is not critical, but helps the participants to prioritize their expenses.  The group can help each other remember their typical monthly expenses.

 5.         Using the worksheet, identify monthly income. Be sure to list income that may not be        paid in cash, but can be used for expenses (food stamps, etc.)  Be sure to use “net” not      “gross” income.

 6.         Using the worksheet, identify monthly expenses.  Daily or weekly expenses should be calculated to determine monthly amounts.  Irregular expenses, such as insurance paid every six months, should be calculated to determine a monthly amount.  If expenses vary monthly, use an average.  Some sharing or brainstorming will help participants remember some of their expenses.

             Be sure to include regular savings amounts if they come from “net” income.   If savings or investments are withheld from paychecks, do not include them as expenses.

 7.         Subtract total monthly expenses from total monthly income to determine the difference (a positive or negative amount).

 8.         Generally discuss the participants’ reactions to their income and expense budget.  Were they surprised?

 9.         Briefly discuss some “next steps” participants can take.  (How to reduce spending or what they can do with any “extra income”?)  This can motivate the participants to participate in Activity 2: Managing a Budget.”