Why Use a Budget?

Activity

 Students create a budget for a class trip to New York City.  The decisions require trade-offs and opportunity costs.

Your task is to create a budget for the class trip to New York City.  You have a total of $18,000.  You have some choices to make.  You can’t do everything you want to do   with the income you have.  There are 60 students and 10 chaperones.  You do not have to cover the chaperones’ costs, except transportation, hotel and the celebration dinner. 

The trip will take four days and three nights.  You have two full days in the city and time to schedule four daytime activities and two night activities.  The budget will cover all meals. You must schedule one “celebration” dinner.  Students will not be allowed to spend any additional money for trip activities.

Procedures     

1. Discuss the purposes of a budget - connecting income to spending, making spending (prioritizing) decisions, and planning for future financial purchases and goals.

2.   Review the key terms: budget, assets, liabilities, income, and expenses.

3.   Discuss the difficulties people might face when trying to live within a budget.  Elicit the students’ ideas about the importance of goal setting, putting the budget in writing, and self-discipline.  Stress the need to begin thinking long-term to achieve future goals.

4. Discuss the ideas  “trade-offs” and “opportunity costs” in the context of a budget.  Trade-offs require choices from among competing goals.   The opportunity cost of a decision is the value of the next best alternative that is given-up.