Chances are that you’ve created a budget sometime in your life.  If you’ve ever planned to save up to buy something, you probably created a budget, even if it was only in your mind.  A budget is basically a plan of income – money that gets given to you, and expenses – money that you spend on things.

Budgets can range from very simple to extremely complicated.  You may come up with a simple budget to buy something by saving up pocket money or money from a part time job.  On the other end of the scale there are budgets for huge multi-billion dollar companies which they rely on to avoid going bankrupt!  Being able to come up with a useful budget is an absolute necessity for surviving in life.

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Typical budget questions

A typical budget question will give you information about the income of a family or person, and also about what they spend their money on.  You might get asked to work out how long it will take them to save up enough money to buy a certain item.  Or, the question might ask how much they have to reduce their expenditures (the amount of money they spend on things) in order to achieve a certain savings goal.  Here’s an example of a typical question:

Living out of home question

Bob has finished school and wants to move into a share house with some of his friends.  He’s got a part time job that earns him an average of $335 a week.  The taxman takes about $2000 of this income every year.

Bob’s got a nice new car, which he’s worked out costs him about $20 a week in fuel costs.  Also, he needs to get it serviced twice a year, at $300 a service.  Car registration is $650 a year.  His car insurance is $1000 a year.  His grocery costs work out to about $60 a week, and electricity, water and home phone bills are another $20 a week.  His mobile phone plan costs $39 a month, and he never spends more than the $99 of calls included with his plan.  He spends about $30 a week on his girlfriend.  Going out with his friends to movies etc… he spends about another $30 a week. 

·         Assuming Bob doesn’t need to save any money, how much a week can Bob afford to pay in rent?

·         Bob finally finds a place for $70 a week in rent.  He wants to go on an overseas holiday, which he’s worked out he needs to save up $5000 for.  Assuming he’s already got $3000 saved up, how long is it going to take him to save up for the trip?


Ok, so we’ve got two questions here.  The first one is asking us to find an amount of money, and the second one is asking us to find a time length.

The question gives us information about Bob’s income and expenses.  For the first question, the only expense that it doesn’t give us is how much Bob pays in rent.  The first question does however give us the key phrase, “assuming Bob doesn’t need to save any money.”  When you’re not trying to save money, your income is the same as your expenses:


Now, when you talk about income and expenses, you need to choose a time frame in which to talk about them – a week, a month, or a year for instance.  Because this question is asking us how much rent Bob can afford to pay a week, let’s use a time frame of a week.  This means that any income or expenses that aren’t given to us in terms of a week need to be converted into an equivalent amount for a week.  So for instance, his car insurance, which is $1000 per year, we need to divide by 52 to get an equivalent amount per week - $19.23.

So what we can do is work out Bob’s income per week and his total expenses per week:


He earns $335 a week, but gets taxed about $2000 per year.  We need to convert $2000 tax per year into a per week amount:


So Bob’s net income is (net amount is the actual amount of money he is payed in the end, once tax has been taken out):


And that’s our income part worked out.  Income is generally easier to calculate because there are usually only a couple of sources of income.  Expenses on the other hand – there are lots of different things we spend money on.


We need to convert every single expense into a per week amount.

Car fuel

$20 / week

Car services

$300 × 2 / year

= $600 / year

= $11.54 / week

Car registration

$650 / year

= $12.50 / week

Car insurance

$1000 / year

= $19.23 / week


$60 / week

Utilities (electricity, water etc…)

$20 / week

Mobile phone

$39 / month

=$9.75 / week


$30 / week

Friends, going out

$30 / week


Total: $213.02 / week

So his total expenses per week add up to about $213.00.  The only expense we don’t have in the list is the amount he can spend on rent a week.  Because he doesn’t need to save any money, this means that the rest of his income that isn’t spent on already existing expenses can be spent on rent:


This is a reasonable amount for a room in a share house in most cities in Australia, so chances are good for Bob that he can actually afford to live out of home.

The second question is slightly different.  It gives you an exact amount for how much Bob is paying in rent.  For this question, we know all of Bob’s expenses and income exactly, so we can work out how much money Bob is left with each week:


So Bob will be saving about $14 a week.  He needs $5000 total, of which he already has $3000.  This is the sort of simple thing that can ruin the question for you – you might see the $5000 amount straight up and just sort of gloss over the fact that he’s already saved up $3000.  Bob needs only $2000 more:


So Bob’s going to need almost 3 years to save up the money for his holiday.  Note that because this is a maths question, certain realities of the situation are overlooked.  For instance, we’ve averaged his car insurance amount over an entire year, but he probably has to pay this up front at the beginning of each year.  This would mean that he’d actually have saved up less money after 147.9 weeks than we’ve calculated.       

Handy Hint #1 -  Time measurement units – weeks and months

There are 365 days in a normal year, and 366 in a leap year which happens once every 4 years.  Now, it’s generally accepted that there are 52 weeks in a year, with 7 days in a week.  But what does 52 × 7 equal?

So there are actually slightly more than 52 weeks in a year!  In a normal year there are  weeks in a year, and in a leap year it’s  weeks.  So if you wanted to be really, really accurate, when you’re given an overall tax amount of $2000 like in the previous question, you’d divide it by  to get an average weekly amount.

Generally speaking, it’s OK to just assume that there’s 52 weeks in a year.  Some teachers are pedantic (meaning very picky) enough that they might take half a mark off your answer if you don’t use the exact amount.  If you happen to have a teacher like this, you should be able to argue your way out of it by putting something on your question like:

I am using an approximate figure of 52 weeks in a year in my calculation, given that some of the expenses are most likely estimations (for instance it’s unlikely a car service costs exactly $300 or insurance costs exactly $1000).  Also, given that Bob could pick up new expenses, or his income could change, we are only looking for a reasonable estimate of how much money he’ll have to spend on rent.

This should protect you from those annoying picky teachers.