Guidelines to follow when preparing a budget

Question 1

List five guidelines for the preparation of a budget

Answer 1

Estimate total income

List all expenditure

Allocate a percentage of income

Allocate savings

Review and evaluate

Question 2

Explain how one estimates their total income as the first part of making their budget
(5)

Answer 2

Include salary/wages

Include benefits or any other form of income

Do not include irregular income such as bonuses

Divide estimate by twelve if making a monthly budget

Divide by 52 if making a weekly budget

Question 3

Why should irregular income not be included when estimating a person’s total income?

Answer 3

As these are not guaranteed

Question 4

What expenditure should be listed in a budget?

Answer 4

Essential and discretionary expenditure

Question 5

To what should a percentage of income be allocated to when making a budget?

Answer 5

A percentage of total income should be allocated to each listed expenditure

Question 6

Explain the savings element of a budget

3

Answer 6

Every budget contains a saving element to cover unplanned eventualities

Savings allow for funds to be available in times of increased expenditure

Savings should be lodged into a separate savings account

Question 7

Explain the review and evaluate step of planning a budget

3 points

Answer 7

Carry out regular reviews of the budget to ensure it is effective

Keep bills and receipts to monitor spending

Recalculate budgets if there is a change in circumstances e.g. change in job