EMS Grade 7 Term 2 Budgets

Budget Overview

• A budget is a plan that outlines expected income and expenses for a specific period, allowing individuals and businesses to make wise financial decisions and achieve savings.

Definition of a Budget

• A budget is an estimate of future income and expenses, requiring realistic estimates and expectations.
• Budgets are essential for effective financial management in various entities, including households, individuals, businesses, governments, schools, and sports clubs.

Purpose of a Budget

• Acts as a planning tool for managing personal and business finances.
• Helps limit unplanned and unnecessary expenses.
• Develops financial management skills by promoting living on a budget.
• Encourages planning for the future.
• Reduces debt burdens of individuals and businesses.
• Facilitates setting priorities.

Importance of Budgets

• Enables individuals and businesses to spend money wisely.
• Makes savings possible.
• Allows for adjustments to be made as needed.
• Can be adapted to changing circumstances.

Definition and Purpose of a Budget

• A budget is a plan of expected income and expenses for a specific period, helping individuals and businesses to spend money wisely and make savings possible.
• The purpose of a budget is to serve as a planning tool for managing personal and business finances, limiting unplanned expenses, developing financial management skills, planning for the future, reducing debt burdens, and setting priorities.

Budget Period

• Budgets can be drawn up for various periods, such as a month, 4 months, half a year, a year, or 5 years, depending on the management or individual's needs.
• A consistent period is essential for planning, reference, and control purposes.

Long-term and Short-term Budgets

• A long-term budget has a period of more than 3 years.
• Short-term budgets are for shorter periods, such as a month, or for specific projects, like a sporting event or matric farewell.

Budget Surplus and Deficit

• A budget surplus occurs when expected income exceeds expected expenses, allowing for allocations to other areas, such as marketing or employee salary increases.
• A budget deficit occurs when expected income is insufficient to cover expected expenses, requiring cost-saving measures and potential plans to increase revenue.

Definition of a Budget

• A budget is a plan that estimates future income and expenses for a specific period.
• It helps individuals and businesses to spend money wisely and make savings possible.

Purpose of a Budget

• A budget is a planning tool for personal and business finances.
• It helps to limit unplanned, unnecessary expenses.
• It develops financial management skills and forces people to plan for the future.
• It helps to reduce debt burdens and set priorities.

Budget Period

• A budget can be drawn up for a specific period of time (e.g., month, 4 months, half a year, year, or 5 years).
• The period should be consistently the same for planning, reference, and control purposes.

Types of Budgets

Long-term Budget

• A budget period of more than 3 years.

Short-term Budget

• A budget for shorter periods of time (e.g., month).
• Can be set up for a specific project (e.g., sporting event, matric farewell).

Budget Surplus and Deficit

Budget Surplus

• Expected income is more than expected expenses.
• A surplus can be used to allocate more funds for marketing or salary increases.

Budget Deficit

• Expected income is less than expected expenses.
• Requires saving and devising plans to increase revenue.

Personal Budget

Characteristics of a Personal Budget

• Budget period is usually monthly.
• Must be realistic and adaptable.
• A means for saving and avoiding unnecessary expenses.

Household/ Personal Income

• Examples: salaries, wages, commission, pocket money/allowance, income from an informal business.

Household/ Personal Expenses

• Fixed expenses: regular and predetermined expenses (e.g., rent, school fees, insurance premiums).
• Variable expenses: frequent but varying expenses (e.g., water, electricity, leisure, groceries).
• Sporadic expenses: unpredictable or infrequent expenses (e.g., car repairs, children's sports tours).

Steps in Setting up a Household/ Personal Budget

• Decide on the budget period (usually monthly).
• List all income and expenses.
• Calculate total income and expenses.
• Calculate the difference between income and expenses (surplus/deficit).
• Decide how to spend the surplus or resolve the deficit.

Budget Overview

• A budget is a plan that estimates income and expenses for a specific period to ensure effective financial management.

Definition of a Budget

• A budget is an estimate of future income and expenses, helping individuals and businesses to spend money wisely and make savings possible.

Purpose of a Budget

• Helps with personal and business financial management
• Limits unplanned and unnecessary expenses
• Develops financial management skills
• Encourages planning for the future
• Reduces debt burden
• Helps set priorities

Budget Period

• Can be for a month, 4 months, half a year, a year, or 5 years
• Long-term budget: more than 3 years
• Short-term budget: shorter periods of time, e.g., a month
• Individual budgets can be set up for a specific project

Budget Surplus and Deficit

• Budget surplus: expected income is more than expected expenses
• Budget deficit: expected income is less than expected expenses
• Surplus can be used to allocate more funds or increase revenue
• Deficit requires saving and devising plans to increase revenue

Personal Budget

Characteristics

• Budget period is usually monthly
• Must be realistic
• Must be adaptable
• Means of saving
• Avoid unnecessary expenses

Household/Personal Income

• Examples: salaries, wages, commission, pocket money, income from informal business

Household/Personal Expenses

• Fixed expenses: regular, determined amounts, e.g., rent, school fees, insurance premiums
• Variable expenses: frequent, varying amounts, e.g., water, electricity, leisure, groceries
• Sporadic expenses: unpredictable or infrequent, e.g., car repairs, children's sports tours

Steps in Setting Up a Household/Personal Budget

• Decide on the budget period
• List all income
• List all expenses
• Calculate total income and expenses
• Calculate surplus or deficit
• Decide how to use surplus or resolve deficit

Business Budget

Characteristics

• Budget period is a year or longer
• Each division has its own budget
• Must be reviewed regularly

Business Income

• Selling goods: sales
• Selling a service: current income
• Renting out a building: rental income
• Interest from investments or savings: interest

Definition and Purpose of a Budget

• A budget is a plan for income and expenses over a specific period, helping individuals and businesses manage their finances effectively.
• The purpose of a budget includes planning, limiting unnecessary expenses, developing financial skills, and reducing debt.

Characteristics of a Budget

• A budget period can vary from a month to several years, depending on the individual or business needs.
• Long-term budgets are for periods exceeding 3 years, while short-term budgets are for shorter periods.

Budget Surplus and Deficit

• A budget surplus occurs when expected income exceeds expected expenses, allowing for allocations to other areas.
• A budget deficit occurs when expected income is less than expected expenses, requiring cost-saving measures and revenue increase plans.

Personal Budget

• A personal budget typically covers a monthly period, must be realistic and adaptable, and aims to save money.
• Household income includes salaries, wages, commissions, and other sources.
• Household expenses are categorized into fixed (e.g., rent, insurance), variable (e.g., utilities, leisure), and sporadic (e.g., car repairs, sports events) costs.

Setting Up a Household Budget

• Decide on the budget period (usually monthly).
• List all income and expenses.
• Calculate total income and total expenses.
• Determine the difference between income and expenses, indicating a surplus or deficit.
• Decide how to allocate a surplus or address a deficit.

Business Budget

• A business budget typically covers a year or longer, with each division having its own budget.
• Business income comes from sales, services, rental income, and interest income.
• Business expenses are divided into operating budgets (routine expenses) and capital budgets (planned purchases of goods).

Drawing Up a Budget

• List all income and expenses.
• Calculate total income and total expenses.
• Determine the difference between income and expenses, indicating a surplus or deficit.
• Decide how to allocate a surplus or address a deficit.