Minds On

How to budget

Budgeting is important. To budget means to keep track of exactly how much money is coming in (earnings) and exactly how much money is going out (expenses). Simply put, it is an estimate of income and expenses.

For example, when a family sets up a monthly budget, it means that they are making important financial decisions on what they need or want to buy in that month. When people say, “that item is not in my budget,” it means that they haven’t set aside the money to purchase the item in the first place. If they do end up buying the item, then something else from the list needs to be changed or removed to balance the budget.

A notebook with a list of monthly expenses. On the notebook is a calculator and a pen.

The goal of budgeting is to never spend more money than you earn. That means, earnings minus expenses should be zero or a positive number.

earnings – expenses = 0 or a positive number

If someone is spending more money than they earn, they will go into debt. If they spend less money than they earn, they can build up their savings. The more money they save, the closer they get to reaching a financial goal.


Earnings and expenses

Let’s dive into what earnings and expenses mean. What do they mean? Can you think of examples? When have you encountered these words used before?

earnings                  expenses

Earnings means any way you have received or earned money.

Expenses are the things that you must pay for. There are three different types of expenses:

Fixed expenses: these are expenses that do not change monthly, such as rent.

Variable expenses: these are expenses that are not always the same, such as shopping for food. The cost is a little different each time.

Unplanned expenses: these are expenses that you did not budget for, such as having to fix or replace the toaster.

Create both the Earnings Graphic Organizer and the Expenses Graphic Organizer in your notebook or use the following fillable and printable documents.

Press the ‘Activity 1’ button to access the Earnings Graphic Organizer. 

Press the ‘Activity 2’ button to access the Expenses Graphic Organizer. 

Making a budget

Consider the following scenario:

A bookstore employee dreams of owning a car one day to make getting to work easier. The employee really wants to purchase a new car, but knows that buying a used car at $20,000 would be easier to afford. Working at a bookstore, we know this about the employee:

  • They earn an income of $4,000 per month.
  • Their income is taxed at 20%.
A hand dropping a coin into a jar that is mostly filled with coins.
  • The employee shares an apartment with a roommate for $2,000 per month.
  • They also share the cost of the internet bill, which is $50 per month, and the hydro bill, which is $75 per month.
  • On weekdays, the bookstore employee tries to eat at home most of the time and spends $150 every week on groceries.
  • On Fridays, the employee and their roommate love to go to the movies and relax. A night out at the movies costs $15 for the ticket and another $15 for snacks.
  • On weekends, the employee stays at their parents’ house while spending time with their nieces and nephews. They don’t spend any money at their parents’ house.

Press the ‘Hint - Income Tax’ button to access more information about income tax and how to calculate it.

Percentage just means “out of one hundred.” So, 20% refers to 20 parts of 100. This can be written in percentage form (20%) or in decimal form (0.20 or twenty hundredths).

In this example, let’s use mental math and figure out 20% of $200.

Now, you need to multiply the number that you are being taxed (let’s pretend it is $200) by 0.20.

200 x 0.20 = 40

This means that $40 of every $200 that you make, goes toward federal income tax.

Therefore, if you make $200, and your income tax is 20%, then you will bring home $160 on your paycheck.

Complete the Earning and Expenses Chart in your notebook or by using the following fillable and printable document.

Earning and Expenses Chart
Earnings per month Expenses per month

Press the ‘Activity’ button to access the Earning and Expenses Chart. 

Discuss the questions below:

  • How long will it take for the bookstore employee to save up for a used car, assuming they need to make a 10% down payment? You can calculate the down payment by multiplying 0.10 (the percentage in decimal form) with $20,000 (the cost of the car).
  • What advice would you give the employee to help them reach their financial goal sooner?
  • What barriers might the bookstore employee face in reaching their financial goal? Think about the three types of expenses (fixed expenses, variable expenses, and unplanned expenses).


Create your own budget

Choose one of the following tasks to demonstrate what you understand about making a budget.

Task 1

A gym employee wants to buy a new laptop within a year's time.

The employee researched laptop prices and decided, based on their learning needs, that they should buy an older model of a Mac Book Air, which costs $1,120. The employee works part-time, and we know this about their situation:

  • The employee earns an income of $1,400 per month.
  • They must pay 10% income tax to the government.
  • Every month, the employee has a few fixed expenses: $1,000 for rent, $50 for hydro, $60 for phone usage, and $75 for Internet.

With the remaining amount, create a healthy monthly budget for the gym employee to save up for the laptop within a year’s time. Think about what types of variable and unplanned expenses they would need to include in their budget plan, such as money for food and emergencies.

Use the Earnings and Expenses Chart, or your preferred method, to list the gym employee's monthly earnings and expenses.

Earnings and Expenses Chart
Earnings per month Expenses per month

Press the ‘Activity’ button to access the Earning and Expenses Chart. 

Task 2

Create your own budget scenario for someone. You can use the bookstore employee scenario from the Action section as a guide.

Does the employee work full-time (40 hours a week) or part-time (20 hours a week)?

Decide on the hourly rate that they are paid for their job in one year ($18.00/hour, $20.00/hour?). Be sure that your budget planning shows:

  • Where does this person work, and how much are they paid per month?
  • How much will they have to pay for income tax per month?
  • What are some expenses that they have? Be sure to add fixed expenses, variable expenses, and one or two unplanned expenses.
  • What is this person saving for? How much will it cost?
  • How long do you think it will take to achieve their financial goal?

Create a way to demonstrate the earnings and expenses in a clear and organized way.


As you read through these descriptions, which sentence best describes how you are feeling about your understanding of this learning activity? Press the button that is beside this sentence.

I feel...

Now, record your ideas using a voice recorder, text-to-speech, or writing tool.