Budgeting
Budgeting is a way of planning your finances to ensure that you have enough money to purchase items you want. You may be planning a birthday party or going to a festival.
It can be a good idea to write a list of everything you need or want and how much the items cost. You could then see if you have enough money to purchase all those items.
It is always handy to overestimate the cost of items or even add a Money that is set aside in case of a possible event or situation, eg an unplanned expense or something costing more than expected. into your budget, just in case you overspend.
Example
Lexi’s mum has bought her tickets to go to a new festival in Reading. Lexi has been saving for a few weeks and plans to go to the festival for two nights with her friends. She has saved £300. She has written out the following budget.
| Item | Cost |
| Wellies | £25 |
| New outfit | £45 |
| Three new vest tops | £10 |
| Chocolate | £4.50 |
| Rucksack | £50 |
| Train tickets (Swansea–Reading Super Saver return) | £36 |
| Spending money | £150 |
| Tent | £65 |
| Hair extensions | £55 |
| New shoes | £48 |
| Item | Wellies |
|---|---|
| Cost | £25 |
| Item | New outfit |
|---|---|
| Cost | £45 |
| Item | Three new vest tops |
|---|---|
| Cost | £10 |
| Item | Chocolate |
|---|---|
| Cost | £4.50 |
| Item | Rucksack |
|---|---|
| Cost | £50 |
| Item | Train tickets (Swansea–Reading Super Saver return) |
|---|---|
| Cost | £36 |
| Item | Spending money |
|---|---|
| Cost | £150 |
| Item | Tent |
|---|---|
| Cost | £65 |
| Item | Hair extensions |
|---|---|
| Cost | £55 |
| Item | New shoes |
|---|---|
| Cost | £48 |
Lexi has split her list of items into two columns.
She hopes to have enough money for all her must-have items and two extra items on top. Her friend Luc says that she will not be able to get any of her extra items. Who is correct – Lexi or Luc?
List of must have items = 25 + 65 + 50 + 150 + 36 = £326.
Therefore, the total amount for the essential items is £326 so she has not budgeted enough for the essential items let alone the extra ones. She is £26 pound short. It looks like Luc is correct!
Question
Leon has budgeted £1,200 for his camping holiday. He wants to stay on the campsite for 12 nights on a pitch with electricity. He is going to use any money left over as spending money. How much spending money has he budgeted per day?
12 nights at £25.
Cost of pitch = 12 × 25 = £300.
Spending money for holiday:
£1,200 - £300 = £900.
Spending money per day:
£900 ÷ 12 = £75.