USE A PERSONAL BUDGET TO MANAGE

Document Sample
USE A PERSONAL BUDGET TO MANAGE Powered By Docstoc
					                                                                                                           1



                                                               “Working together for a skilled tomorrow”




                             Learning Materials

                 Unit Standard Title:               Use a personal budget to manage
                                                    own money


                 Unit Standard No:                  10718


                 Unit Standard Credits:             3


                 NQF Level:                         2



                               Facilitator Guide

                   This outcomes-based learning material was
                                  developed by
                          INHLE Business Solutions
                                 and reviewed by
                      Judy Norris of Skills Initiative and
              Charmaine Lloyd of Skills Forward and Hilary Lilford
                  with funding from INSETA in October 2003.


                         The material is generic in nature.
          Its purpose is to serve as a guide for the further development
              and customization of company-specific, learner-specific
                   and situation-specific learning interventions.


                                             Disclaimer:
  Whilst every effort has been made to ensure that the learning material is accurate, INSETA takes no
   responsibility for any loss or damage suffered by any person as a result of the reliance upon the
                                     information contained herein.




INSMAT final materials                                                                           31/10/03
Unit Standard No.10718                                                                                                         Page 2



Table of Contents

1     INTRODUCTION AND OVERVIEW OF THE MODULE ....................................... 4
    1.1      THE PURPOSE OF THIS MODULE ......................................................................... 4
    1.2      THE TEACHING STRATEGY .................................................................................. 4
    1.3      CRITICAL CROSS FIELD AND DEVELOPMENTAL OUTCOMES .................................... 5
    1.4      MASTERING THE STUDY MATERIAL ........................................................................... 5
2     MODULE 1- RECORD AND ANALYSE CURRENT SPENDING PATTERNS .... 6
    2.1      LEARNING ABOUT NEEDS AND WANTS ...................................................................... 8
    2.2      DID YOU KNOW? ................................................................................................... 8
    2.3      BUT WHAT ARE MODERN MANS NEEDS AND WANTS? ............................... 8
    2.4      WHAT ARE YOUR WANTS ........................................................................................... 8
    2.5      WHAT DO WE NEED .................................................................................................... 8
    2.6      MASLOW ............................................................................................................... 10
    2.7      TASK 1– IMPORTANT NEEDS AT HOME .................................................................... 11
    2.8      TASK 2– IMPORTANT NEEDS AT WORK................................................................... 11
    2.9      CLASS EXERCISE 1- WHAT IS THE DIFFERENCE BETWEEN A WANT AND NEED ....... 12
    2.10     TASK: 3- TEST YOUR UNDERSTANDING ......................................................... 13
    2.11     SUMMATIVE ASSESSMENT 1– NEEDS AND WANTS CHART............................. 14
    2.12     COSTS AND EXPENSES ........................................................................................ 15
    2.13     TASK 4 – FIXED AND VARIABLE EXPENSES............................................................. 16
    2.14     TASK:5- YOUR FIXED VS. VARIABLE EXPENSES ..................................................... 17
    2.15     TASK 6 - QUESTIONS .............................................................................................. 19
    2.16     OPPORTUNITY COST .......................................................................................... 20
    2.17     CLASS EXERCISE 2 ................................................................................................... 20
    2.18     SELF REFLECTION .................................................................................................... 21
3 MODULE 2: - TAKE CONTROL OF OWN FINANCES AND GET THE MOST
FOR ONE’S MONEY. .......................................................................................................... 22
    3.1      TAKE CONTROL OF YOUR MONEY ............................................................................ 23
    3.2      TASK7 - CONTROL OF MONEY ................................................................................. 23
    3.3      A SMART CUSTOMER ............................................................................................... 24
    3.4      TASK 8 – SMART CUSTOMER ................................................................................... 24
    3.5      ADDITIONAL SOURCES OF INCOME. ......................................................................... 25
    3.6      TASK 9 – ADDITIONAL SOURCES OF INCOME. ......................................................... 25
    3.7      DISCRETIONARY PAYMENTS ................................................................................... 26
    3.8      A SHOPPING LIST ..................................................................................................... 26
    3.9      TASK 10 - SHOPPING LIST ....................................................................................... 27
    3.10      VARIANCE ............................................................................................................... 28
    3.11     IMPULSE BUYING ..................................................................................................... 29
    3.12     TASK 11 – PLANNING............................................................................................... 30
    3.13     DISSATISFACTION. ................................................................................................... 31
    3.14     CONSUMER RIGHTS .................................................................................................. 31
    3.15     TASK 12 – CONSUMER SATISFACTION ..................................................................... 32
    3.16     CREDIT BUREAU ...................................................................................................... 33
    3.17      TASK 13 - CREDIT BUREAU .................................................................................... 34
    3.18     SUPPLIER RIGHTS ..................................................................................................... 35
    3.19     GAMES OF CHANCE .................................................................................................. 35
    3.20     TASK14 - GAMBLING ............................................................................................... 35
    3.21     KINDS OF PEOPLE WHO OFFER ADVICE .................................................................... 36
    3.22     CASE STUDY 1 .......................................................................................................... 37
    3.23     SELF REFLECTION .................................................................................................... 38



INSMAT final materials                                                                                                       31/10/03
Unit Standard No.10718                                                                                                       Page 3



4 MODULE 3: RECOGNISE THE NEED TO SAVE AS PART OF PERSONAL
FINANCIAL MANAGEMENT. .......................................................................................... 39
   4.1   CHANGING FINANCIAL NEED. .................................................................................. 40
   4.2   FUTURE FINANCIAL NEEDS. ..................................................................................... 40
   4.3   FUTURE RESPONSIBILITIES ...................................................................................... 40
   4.4   TASK 15 – FUTURE FINANCIAL NEEDS .................................................................... 41
   4.5   PERSONAL GOAL-SETTING ...................................................................................... 45
   4.6   TASK 16 – SEVEN STEPS OF GOAL SETTING. ........................................................... 47
   – ALLOW THE LEARNER TO WORK ON A SEPARATE SHEET OF PAPER IF NECESSARY. ................ 47
   4.7   TASK 17 - ESTABLISHING YOUR FUTURE FINANCIAL NEEDS. .................................. 49
   4.8   TASK18 - FINANCIAL MODELLING ......................................................................... 50
   4.9   BUDGET ................................................................................................................... 51
   4.10 FREE MONEY FOR SAVING........................................................................................ 51
   4.11 TASK19 - SAVINGS .................................................................................................. 51
   4.12 SELF REFLECTION .................................................................................................... 52
5 SPECIFIC OUTCOME 4: COMPILE A PERSONAL BUDGET FOR THE NEXT
3 MONTHS, TO MANAGE OWN MONEY ...................................................................... 53
   5.1       TASK 20 - AN EMERGENCY FUND COMPREHENSION ............................................... 54
   5.2       HOUSEHOLD INCOME ............................................................................................... 55
   5.3       DEDUCTIONS ............................................................................................................ 55
   5.4       MONTHLY FIXED PAYMENTS ................................................................................... 55
   5.5       CATEGORIES ............................................................................................................ 55
   5.6       WEEKLY INCOME ..................................................................................................... 55
   5.7       NET SURPLUS OR NET DEFICIT ................................................................................ 56
   5.8       EXAMPLE AND TASK 21 - COMPILE A BUDGET ...................................................... 57
   5.9       SUMMATIVE ASSESSMENT 2 .................................................................................... 61
   5.10      SELF REFLECTION .................................................................................................... 63




INSMAT final materials                                                                                                     31/10/03
1 Introduction and overview of the module
1.1 The purpose of this module

Welcome to the Unit Standard: Use a personal budget to manage own money. with
INSQA

The purpose of the module is to provide learners with knowledge and skills to enable
them to interpret basic financial statements of companies.

1.2 The teaching strategy
The focus of our teaching role is on facilitating your learning experiences toward
achieving specific assessment criteria. Furthermore, for each of the topics that
comprise this module, the learning experiences are designed with the aim of enabling
you to master the learning content at a predetermined competence level.

1.2.1   LEARNING OUTCOMES, ASSESSMENT CRITERIA AND LEVELS OF
        MASTERY
Each topic dealt with in this module contains a statement of the learning outcomes
that we wish to accomplish for the particular topic. In broad terms these tell you about
the knowledge and skills we expect you to have mastered by the time you have
completed your study of each topic. The assessment criteria indicate a required end
result, which is what you should be able to do once you have completed the study
unit. The formulated assessment criteria are based on various levels of mastery that
you are required to achieve when mastering the study material. The required levels
of mastery for this module vary from knowledge and comprehension to the
integration of knowledge under given circumstances. The following levels of mastery
are distinguished for the purposes of this module (Please note that these levels are
not exact duplications of those provided by SAQA, but summaries thereof.):

1.2.1.1 Level 1: Knowledge and comprehension
This calls for a knowledge and understanding of facts, methods, processes and
structures and an ability to list and explain them. It involves memorising as well as an
awareness, immediate discovery, recall or recognition of relevant information in
various forms. A limited degree of interpretation is required.

1.2.1.2 Level 2: Application
This calls for a knowledge and understanding of the background and of related topics
and the ability to apply rules, principles, techniques and methods to a problem in
order to find a solution based on the information that is provided.

1.2.1.3 Level 3:Integration
This calls for a full factual knowledge of the topic, of the background and of related
topics and an ability to carry out integration functions, such as analysis,
interpretation, synthesis and evaluation. It includes the application of multi-
disciplinary knowledge and problem solving in cases where there are various
acceptable solutions. In this sense it constitutes creative thinking, comprising fluency,
flexibility, originality, critical awareness and independent thought.

The module is aimed at critical cross-field and development outcomes that are the
objectives of the module. They aim to facilitate your mastery of the subject matter by
applying a cross-section of skills and assist your development with defined
outcomes.



INSMAT final materials                                                           31/10/03
1.3   Critical Cross Field and Developmental Outcomes
You are able to identify, solve problems and make decisions based on the
information of this unit standard

You are able to communicate effectively using visual, mathematics and language
skills in the modes of oral and written presentation when evaluating the strengths and
weaknesses of an entity.

You are able to organise and manage yourself effectively compiling a personal
assets and liabilities statement.

1.4   Mastering the study material
This module requires careful and dedicated study. You must become proficient in the
material of this unit standard, which requires diligence and thoroughness.




INSMAT final materials                                                        31/10/03
2 Module 1- Record and analyse current spending patterns
Learning Outcomes

1.1     The difference between needs (essential goods and services) and wants
        (discretionary goods and services) is explored in relation to own situation.

1.2     The difference between fixed and variable costs is explained and examples
        given from own experience.

1.3     The results of a record kept of own variable expenses over a three-month
        period is presented, and the monthly amount of each item is calculated as an
        average.

1.4     Own expenditure is categorised into commonly recognised sets.

1.5     An analysis is made of own spending as to which items are fixed essential,
        variable essential and discretionary.

1.6     The results of a record kept of own discretionary expenses over a three
        month period is presented and the percentage calculated of total expenditure
        that is discretionary.

1.7     Discretionary expenses and their percentage of total monthly expenses are
        discussed with a view to distinguishing between reasonable and
        unreasonable spending amounts and possible alternative uses of these
        amounts.

1.8     The concept of opportunity cost is explained in terms of what you gain or
        loose as a result of making a financial choice.




INSMAT final materials                                                         31/10/03
.




    Please note you are required to keep
    the slips, receipts and list all your
    monthly expenses to be used in the
    final assessment at the end of the
    unit




INSMAT final materials                 31/10/03
2.1     Learning about needs and wants

Society has always required a value system to facilitate the allocation of scarce
resources. Through the ages, man has used systems such as bartering, currencies
like cowry shells, livestock and in the Polynesian Islands, great big round stones with
holes. All of this is aimed at providing a system of exchange, based on the principle
of supply and demand.



2.2     DID YOU KNOW?

THAT...

       In 1652 Jan Van Riebeck brought the first coins to South Africa.
       In 1782 the first notes to be introduced to the Cape were the Rix dollars that
        were signed by hand.
       In 1815 the Griquas were the first people in South Africa to mint their own
        money. The coin was called the Griqua coin.
       Today man satisfies his needs and wants by using notes and coins i.e. Rands
        and cents.


2.3     BUT WHAT ARE MODERN MANS NEEDS AND WANTS?

“Man, the unfortunate creature, is plagued with wants. He wants, amongst other
things, love, social recognition and material necessities and the comforts of life.

We are blessed with certain aptitudes and are surrounded by quantities of property
resources, both natural and manufactured. The obvious action is to use the available
human and property resources – labour, managerial talent, tools, machinery, land
and mineral deposits to produce goods and services which satisfy these wants”
                                            Economics – Campbell R. Mcconnell

2.4     What are your wants

When you are hungry, you need food, When you are thirsty you need water, In winter
you need warm cloths, In summer you need cool cloths.

Mankind requires many things in order to live. Everything we require to enable us to
live are our wants or needs

2.5     What do we need

A need is a necessity; something that is ESSENTIAL FOR SURVIVAL and thus this
is a compulsory expense.

 An example of an essential need would be a shelter from the elements – a house,
food or clothing.

In the beginning, man had limited needs, food, and shelter e.t.c. but as man has
become more sophisticated, these needs and wants have increased. Today, we not
only need food, but we need an oven to cook the food, a fridge to keep the food from
going off..



INSMAT final materials                                                           31/10/03
The needs and wants of man have become far more varied – take a look at the
various choices we have and the decisions we have to make about these choices on
a daily basis.

The wants of primitive man


              Food                                         Clothing
     Raw meat and fish tubers                          Cured animal skins
           and fruit




                                      WANTS
                                   PRIMITIVE MAN




                Housing                                    Recreation
                 Cave                                       Dancing




The wants of modern man


                Food                                      Clothing
    Processed meat and fish,                       Underwear, shirts, dresses,
   cereals, fruit and vegetables                         sports wear




                                     WANTS
                                   MODERN MAN




             Housing                                       Recreation
   House, flats, tents, caravans                    Sport, dancing, films TV.
                                                             Travel




INSMAT final materials                                                      31/10/03
2.6   MASLOW

Abraham Harold Maslow, a top psychologist was born April, 1908 in Brooklyn New
York did a study on peoples needs and found there are 5 basic needs an individual
needs to satisfy.

Here they are scaling from the bottom upwards




                                     LEVEL 5 - Self
                                     -actualisation

                               LEVEL 4 - Esteem needs



                              LEVEL 3 - Belonging needs


                                LEVEL 2 - Safety needs


                            LEVEL 1 - Physiological needs



                                                        Marlow’s Hierarchy of Needs


The physiological needs: This includes the needs for oxygen and water and all the
necessary things we need to survive.

The safety and security needs: Here we look for structure, limits and security.
The love and belonging needs: Here you feel the needs for friends, a sweetheart,
children, affectionate relationships in general, even a sense of community.

The esteem needs: Here we look for the self – esteem need and respect.
 Self – actualisation needs: This is the need to reach your ultimate potential; this can
be achieved once the lower ranking needs have been achieved.




INSMAT final materials                                                           31/10/03
2.7   Task 1– Important Needs at home

List five important needs to you and state whether you are able to satisfy these
needs regularly. Estimate a price for each of these on a monthly basis

       Your Need at home             Can you satisfy       Estimated
                                     regularly             monthly price
       Food and Water                Yes / No              R


       Safety                        Yes / No              R


       Love                          Yes / No              R


       Respect                       Yes / No              R


       Obtain Goals                  Yes / No              R




2.8   Task 2– Important Needs at work

List five important needs to you at work (consider why you work) and state whether
you are able to satisfy these needs regularly. Estimate a price for each of these on a
monthly basis

       Your Needs at work            Can you satisfy       Estimated
                                     regularly             monthly price


           Note to the Facilitator

           As in the table above get the learner to be as honest as
           possible with himself. Explain that this is his own work and
           for him to get anything out of it, he /she must be willing to
           be honest.




INSMAT final materials                                                         31/10/03
2.9   Class Exercise 1- What is the difference between a want and need


Brainstorm what you think the difference is between a want and a need. Make notes
for your self.




         Note to the Facilitator.

         Get the class to brainstorm what is a need and what is a want.
         You may want to draw this up on a flipchart or you may want to
         split the class into groups and as then to consider this.




  A want is a desire not a need

  It is very desirable to satisfy all the needs and wants to make life
  comfortable. Unfortunately very few people earn enough money to acquire
  both; therefore choices have to be made. Needs must be purchased first
  and only if there is money over can wants be obtained.




INSMAT final materials                                                     31/10/03
2.10 Task: 3- TEST YOUR UNDERSTANDING

Some examples of personal needs and wants (column A) have been given to you. In
column B associate a want with each of these, for example, to eat is a need, but to
want is to eat exotic foods at restaurants. Once you have completed this, go to
Column C and estimate a cost difference between acquiring your need and your
need on a monthly basis.

Column                       Column B                       Column C
Needs                        Wants                          Price Difference
Eat                          Eat exotic foods


Drink                        Drink a variety of coffees


Warmth                       Wear fashionable clothes


Safety                       To be free of crime


Love


Travel (Daily Basis)


Travel (Holiday)


Education (Yours)


Education (Your Children)


Luxury Goods




INSMAT final materials                                                      31/10/03
2.11 SUMMATIVE ASSESSMENT 1– Needs and Wants Chart


Create a chart by collecting pictures, drawing and advertisements that categorise
your own compulsory needs and wants. You can use magazines, newspapers,
advertisements and fliers.

The chart must illustrate a minimum of five different needs and wants. However,
thinking carefully, try and categorise as different types of needs and wants, for
example, Housing and Food. Don’t be afraid to focus on your higher needs and
wants and not only on the basics.




INSMAT final materials                                                         31/10/03
2.12 COSTS and EXPENSES

Every household has certain expenses that have to be paid. These costs can be
divided into;

       Fixed,
       Variable,
       Discretionary,
       Opportunity costs.

A fixed cost is a compulsory expense that does not change from month to month
.for example. School fees and Medical Aid.

A variable cost is a compulsory expense that changes due to the amount that is
used, for example Bank charges and Meat.




INSMAT final materials                                                      31/10/03
2.13 Task 4 – Fixed and Variable Expenses


Categorise the following expenses into fixed and variable costs. For each example,
state how much you spend on each during one month. If you don’t spend anything on
a particular expense, put a zero next to it.


   Rent (Bond), telephone, electricity, car insurance, transport,
  medical aid, car payments, food, wages, meat, education, travel
                      costs Loan Repayment



Fixed Expense            Your Monthly          Variable Expense        Your Monthly
                         cost                                          Cost
Rent (Bond)                                    Electricity


Car insurance                                  Telephone


Medical aids                                   Transport


Car payments                                   Food


Wages                                          Meat


Education


Travel Costs


Loan Repayments
(Debatable)




  Electricity, food, transport, telephone, water are all variable due to the fact that
  each month does have the same amount of days in it and certain seasons
  require more use than other seasons, e.g. in winter we need heaters which
  consume electricity.

  A discretionary cost is a cost where you have the chance to purchase an
  example is entertainment and clothing and all items that are not included in
  fixed and variable costs.




INSMAT final materials                                                             31/10/03
2.14 Task:5- Your Fixed vs. Variable Expenses

Using the household receipts from the past 3 months complete the following
graphs. Then add up the total cost of the individual columns and see which
expense cost the most.

Alternatively, if you have not kept your monthly receipts for the last three
months, use the estimates you have written down in the previous exercises,
however try and vary the amounts on a month to month basis.

Number          Expense       Fixed /    Month 1      Month 2      Month 3
                              Variable
1               Electricity   F          300          450          600
                              V
2               Telephone     F          200          400          450
                              V
3               Movies        F          200          400          300
                              V
4               Rent          F          1000         1000         1000
                              V
5               Clothing      F          2000         400          600
                              V
6               Food          F          1400         1450         1500
                              V
7               Medical aid   F          700          700          700
                              V
8               Car           F          420          420          420
                payments      V
9               Restaurant    F          140          2100         1700
                              V
10              Travel        F          200          220          300
                              V




INSMAT final materials                                                    31/10/03
Graphs

Plot your expenses on a monthly basis. Use the X Axis (The side Axis) to state the
Rand value, and the Y Axis (The bottom Axis) for the month. – see example below.
Try and put all your fixed expenses onto one graph and all your variable expenses
onto the second. Use different colours or lines to illustrate the different types of
expenses.


                 450
                 400
  Rands          350
                 300
                 250
                 200
                 150
                 100
                 50

                         Month 1     Month 2        Month 3
                         Months




INSMAT final materials                                                         31/10/03
2.15 TASK 6 - Questions


 Answer the following questions (Place a cross in the block which has the
answer.)

1.      Which one consumed the most money?

  Fixed cost             Variable cost    Discretionar
                                          y cost

2.      Which one can you reduce?


 Fixed cost          Variable cost        Discretionar
                                          y cost

3.      Which one is a reasonable amount of money?

 Fixed cost         Variable cost        Discretionar
                                         y cost

4.      Which one is an unreasonable amount money?

 Fixed cost         Variable cost        Discretionar
                                         y cost
5.      Too much money has been spend on discretionary expense

If possible, suggest a way to reduce the discretionary cost




INSMAT final materials                                                  31/10/03
2.16 OPPORTUNITY COST

As resources are scarce relative to the virtually unlimited wants which these
resources can be used to satisfy. As a result choices among alternatives need to be
made, Specifically, if you were to buy more bread this would mean that you would
have less money to buy cold drink.

Thus the amount of other products which must be forgone or sacrificed to
obtain a unit of any given product is called the opportunity cost of that
product.


Compare writing a book for 3 months and receiving R50 000 and working at a job for
3 months earning R45 000 for the 3 months. The difference of opportunity (R5 000)
but taking into consideration the fact that month 4 the book won’t pay an income but
the job will pay a salary.

That is the decision that has to be made.



2.17 Class Exercise 2

Divide yourselves into groups on approximately three people. Discuss a life situation
amongst yourselves that illustrates the above concept. When you are ready choose a
group member to present this to the class. Make notes of the other examples
presented in the class.




INSMAT final materials                                                       31/10/03
2.18 Self Reflection

Take five minutes to think about what you have just read and learnt. Try and apply it
to you own situation. Make a note for yourself about areas you would like to think
about and further address in your own life.




INSMAT final materials                                                         31/10/03
3 Module 2: - Take control of own finances and get the most
  for one’s money.
Learning Outcomes

2.1       Practical ways in which a person can take control of his/her money affairs
          are listed in terms of a budget, saving costs and additional sources of
          income.

2.2       The concept of discretionary payments is explained and used to show how
          one can make additional money available for fixed and variable costs.

2.3       Evidence is provided of a comparison between one’s estimated and actual
          costs of at least three items of monthly expenditure.

2.4       The implications of variance between estimated and actual costs are
          discussed with reference to own experience.

2.5       The concept of variance is explained with reference to the difference
          between own estimated and actual costs.

2.6       The dangers of impulse buying are illustrated for authentic situations.

2.7       The difference between short, medium and long-term planning is discussed
          with reference to own circumstances.

2.8       A list is made of steps to be taken if you have a complaint about a product,
          service or violation of consumer rights.

2.9       The concept and the consequences of being listed by a credit bureau are
          explained and an indication is given of how a person can avoid or rectify
          being listed.

2.10      The likelihood of winning or making money easily on games of chance is
          explored and the chance of winning is estimated based on current known
          payouts.

2.11      A list is compiled of the kind of people who can offer advice on making
          financial decisions.

2.12      The consequences of taking financial advice from an unqualified or
          incorrectly informed person are described with reference to case studies.

2.13      The rights of the consumer are named and explained as they apply in the
          South African context.




INSMAT final materials                                                              31/10/03
3.1   Take control of your money


You have to learn to be a skilful shopper by taking the necessary precautions against
over spending, thus getting more value for your money.


3.2   Task7 - Control of money

In a group:

Discuss how you could achieve this. Write down 5 points that your group has decided
makes a smart consumer.

1.




2.




3.




4.




5.




INSMAT final materials                                                        31/10/03
3.3     A Smart Customer

Consider the following ideas of what constitutes a smart consumer.

       List your required goods and estimate the costs before you enter the
        supermarket.
       Compare prices from store to store.
       Go for value for money e.g. house brands
       Enquire about discount for cash or for students.
       Beware of guarantees, read them and take note whether they are full or
        limited guarantees. Keep the receipts and guarantees for future reference.
       Be ware of hawkers because some items are not always value for money.
       Introductory offers are not necessary good buys as they can often lock you in
        for a certain period of time where you will be spending triple the money
        unnecessarily.
       Hire purchase buying is not economical as the interest accumulated
        increases the purchase price.
       Stay away from pay up front schemes. Don’t part from your money before you
        know the facts. Ask questions. It’s your right to know the facts.
       Smart cards (store cards and credit cards) encourage impulse buying as
        many people have landed in deep dept due to overspending.
       Limit your weekly pocket money and don’t lead yourself into temptation.

3.4     Task 8 – Smart Customer

Having now read through the above list, make a further 5 suggestions about how you
behave in a “Smart Customer” Way.




INSMAT final materials                                                        31/10/03
3.5   Additional sources of income.

Sometimes we need to supplement our income with extra money. Now there are
many ways of doing this, for example, Working part time, baby-sitting, running a stall
at a Flea market, baking cookies can help to increase the monthly income.

Obviously earning additional income means that you have forgo free time, and in
most cases this “resource” is limited, so you need to always ask yourself the question
of whether you are doing the right thing.

3.6   Task 9 – Additional Sources of Income.

List 5 additional sources of income that you would possibly consider taking on, Once
you have done this, list the advantages of each, try not just put this in monetary
terms and the disadvantages of each of these additional sources of income. When
you are finished, think hard and draw a conclusion for yourself about what you think
about this topic.

No      Source of Income          Advantage                Disadvantage
1



2



3



4



5




Your Conclusion




INSMAT final materials                                                         31/10/03
3.7   Discretionary Payments

A discretionary payment is a voluntary donation e.g. Church donation. It is quiet easy
to distinguish between a discretionary payment and a necessary payment, being that
the discretionary payment is one that you choose to make, and that if you don’t make
it you are not going to get in financial trouble for not making it.


3.8   A Shopping list

Consumer often can’t remember the actual price of a product and therefore guess it.




INSMAT final materials                                                         31/10/03
3.9   Task 10 - Shopping List

You are required to draw up a shopping list of 5 items, at first estimating the price
and then actually finding out what the price is. Complete the table below.

No        Item                                 Estimate Price         Actual Price
1


2


3


4


5


TOTAL


Now calculate the total difference between what you estimated and what the actual
price was and answer the following questions.

(Total of Estimated Price less the total of the actual price). This is known as the
variance.




Is the difference material to you (that is, does it matter to your budget) and if not,
please make a note to yourself on why not.




How are you going to make arrangements in future to not let this happen to you.
Remember that when you do a budget, you use your estimate pricing but when you
spend the money it is based on the actual price. In order to achieve your budget
targets you need to be as close to the actual price as possible.




INSMAT final materials                                                             31/10/03
3.10 Variance

The Variance is the difference between the estimated and the actual price.
There are 2 ways of expressing variances. One is in Rands and the other is in
percentages.


  Example: - The estimated price of an item was R10 but the actual price was R11.

                         The Rand Variance is R11-10=R1
                         The percentage Variance is (11-10) x 100
                                                      10
                                                      = 10%


Using the task above, calculate the variance for each item listed on the shopping list.

                  No     Variance (Calculation)
                  1



                  2



                  3



                  4



                  5




INSMAT final materials                                                          31/10/03
3.11 Impulse buying

Impulse buying is where a consumer buys a product without budgeting for it. Often
one is invited to a tea party where products are sold. This can be classified as
impulse buying.


 Example: - While standing at the till of a Supermarket buying a chocolate, which is
situated next to the till, or walking into a shop to buy a dress after seeing it in the
window.

Give your own example of Impulse buying




It is it important to plan purchases

     A short-term plan or goals are those needed within the next six months
     A medium term plan or goals are those needed between six months and 5
      years.
     A long-term plan or goals include those needed beyond five years.




INSMAT final materials                                                            31/10/03
3.12 Task 11 – Planning

In no more than 5 lines write a short note on the following, for yourself.


Describe your short-term financial plan




Describe your medium term financial plan




Describe your long-term financial plan




INSMAT final materials                                                       31/10/03
3.13 Dissatisfaction.

 If the consumer is dissatisfied, he has the right to complain to the original seller, then
to his senior, then to company management and if still not satisfied he can approach
the consumer council to satisfy his grievances.



3.14 Consumer rights

Our constitution, in South Africa, guarantees us a number of things and when we
read it carefully, it even offer the consumer the following.

You as the consumer have rights, these rights are generally recognised as:

       The right to safety: This offers protection to the Consumer.
       The right to be informed. The Consumer needs to be informed.
       The freedom of choice: The Consumer is given a choice of products.
       The right to be heard: Government give attention to the Consumer’s interests.




INSMAT final materials                                                             31/10/03
3.15 Task 12 – Consumer Satisfaction

You are dissatisfied with a purchase and have had no success talking to
management. Write a letter to the consumer council listing your complaints and the
steps that have been taken to rectify the problem.


The necessary steps must be listed

       Example:-
       Spoke to the assistant about the product. No satisfaction given
       Spoke to the Manager without any success.
       Phoned the Head office and still received no satisfaction
       A letter to the consumer council is compiled.
       Describe accurately what the fault is .

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________



___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________

___________________________________________________________________




INSMAT final materials                                                       31/10/03
3.16 Credit Bureau

The credit bureau is an agency that collects consumers credit and habits and sells
information to companies or creditors about the credit worthiness of an individual. It
awards a credit score to indicate how credit worthy a person is does not make a
decision on whether or not to extend ones credit to the consumer or not. It sells this
information, a credit report to creditors or companies who then decide to grant credit
or not.

Once listed on the Credit bureau as a bad risk, it is necessary to be able to show that
an individual has been free of debt for 2 years.




INSMAT final materials                                                          31/10/03
3.17 Task 13 - Credit Bureau

Answer the following questions.

1.    Define a Credit bureau?
A credit Bureau is an agency, which collects information about consumers.


2.        What does a Credit bureau sell?
It sells information about the credit worthiness about a consumer



3.     A Credit bureau awards a consumer a
It awards a consumer a credit score



4.      Is the Credit bureau involved in the decision whether to extend credit or not?
No it is not involver in the decision of extending credit.



Why would a creditor or company wish to have this information?
They need to know the credit score to lower their risk



5.       Is it important to have good credit habits and history?
 It is extremely important to have a good credit history.



6.     Give a reason for your previous answer?
Credit will not be granted if the credit score is not correct.




INSMAT final materials                                                          31/10/03
3.18 Supplier rights

The supplier has the right to be paid for his goods or services. If you contract a
monthly payment, it has to be honoured. If you dishonour the contract, the supplier
has the right to sue you and report miss-payment to the Credit Bureau.

3.19 Games of chance

 South African research projects on gambling trends have revealed that 0.5% of
gamblers can be considered gambling addicts, this means that 45 000 people are in
trouble, however lower income people get into trouble quicker than higher income
people because they do not have the income to handle their habit.

Slot machine work like roulette wheels, the chance of winning does not increase with
the more time you spend on the machine with out payout.

A gambler has a very small chance of winning the Lotto even if he buys 1000 tickets.
There are approximately 46 million combinations of 5 in the Lotto.

Therefore the chance is one in 46 million if one ticket is bought.

Gambling is all about chance.

3.19.1 To avoid a gambling problem

      Decide beforehand how much money you can afford to loose.
      Don’t try to recoup your loses.
      Note how often you play.
      When you are winning, take a break to think about when to call it quits, and
       lock in your winnings.
      Gambling should be for fun, not a way to get rich quickly, or to pay off debts.


3.20 Task14 - Gambling

Answer the following questions.

1.       Gambling is all about ….
         Chance



2.    Estimate what percentage of gamblers are addicts?
      50%
_________________


3.       Does gambling solve debt problems?
         No



4.        Do a calculated estimate of what your chances are of winning the Lotto
         1 in 20 000 000



INSMAT final materials                                                          31/10/03
3.21 Kinds of people who offer advice

Many people are always willing to offer you advice on you financial affairs, most are
also very willing to offer you advice at a price. However, if you are going to make use
of a financial advisor, make sure that the fulfil the following three categories,

     They are honest and of the highest integrity
     They are registered with an institution and
     They are qualified to offer you’re the necessary advice.

Do not invest in get rich quick schemes - they don’t work.

The following list is a list of institutions and help aids that you can apply to your
thinking when looking to hire a financial advisor.

     Insurance companies, banks, independent advisors and stockbrokers are all
      kinds of people who offer financial advice or financial decisions
     Distinguish between a financial planner who offers a service and a product
      salesman who is looking to sell you something
     A relationship of trust must be developed between you and your financial
      advisor.
     The Financial Planning Institute (FPI) certifies financial planners.
     Visit the FPI’s (Financial Planners Institute) website (www.fpi.co.za) for the
      full list of CFP’s (Certified Financial Planners).
     In the near future financial planners will have to be licensed.
     Build a financial plan and stick to it.
     A financial plan must be regularly monitored as circumstances often change.
     Can you think of a change in circumstances? (Getting married)
     Don’t be affected by market hypes and hot tips.
     Much –a – fool has been caught through his greed.
     When somebody offers you something for nothing beware!




INSMAT final materials                                                              31/10/03
3.22 Case study 1

Consider the following exercise and draw the relevant conclusions at the end.

B. Diligent was advised by Vulture Investments to invest R10 000.00 for one year at
the rate of 10% p. a. with the local bank. Vulture also charges him an admin fee of
R300.00 (payable after the first year). Mr Diligent comes to you at the end of the year
suspecting that he did not make the best investment decision. You are required to
analyse his situation and advise him on the situation.

His questions were ……
1.     At the end of the financial year his investments were worth?
R10000 + (R10000 * 10%) = R11000 less admin cost R300.00 = R10700.00




2.    What would his investment been worth if Vulture had taken their admin fee
      upfront?
R10000 – R300 = R9700 x 10% = R970, added to investment = R10670.00




3.    Did he make a wise investment in respect to (1) the admin fee and (2) his
      place of investment?
Discuss this topic with the class.




INSMAT final materials                                                          31/10/03
3.23 Self Reflection

Take five minutes to think about what you have just read and learnt. Try and apply it
to you own situation. Make a note for your self about areas you would like to think
about and further address in you own life.




INSMAT final materials                                                         31/10/03
4 MODULE 3: Recognise the need to save as part of
  personal financial management.
Learning Outcomes

3.1     The fact that financial needs change over time is discussed and examples
        given from own experience.

3.2     The need to plan for future financial needs is recognised, and examples given
        of own likely short, medium and long-term financial needs.

3.3     Own essential medium term needs are prioritised, and a savings plan is
        developed to meet the two most important of these needs.

3.4     Provision is made in own budget for short, medium and long-term needs.

3.5     An analysis is made to determine how spending can be reduced in order to
        free money for savings.

3.6     The need to plan and manage expenses is discussed with regards to meeting
        current and possible future responsibilities.




INSMAT final materials                                                       31/10/03
4.1     Changing financial need.

No persons life remains static, you are a dynamic person and your needs are ever
changing. Needs change through out a person’s life and have to be continuously
monitored, from opening up a saving’s account in the teenager years, to managing a
pension in the twilight years, each stage has its own priorities of financial needs.


4.2     Future financial needs.

 It is essential to plan for future financial needs. They can be short-term, medium
term, and long- term needs.

       A short – term need applies to essential things like a hospital plan or an
        emergency fund or a need within the next six months.

       A medium – term need applies to things needed between six months and five
        years e.g. A car

       A long – term need applies to needs beyond five years e.g. saving for a
        deposit for a house.

4.3     Future responsibilities

The need to plan for future responsibilities is essential. These needs include
children’s education and retirement.

An emergency fund is particularly important especially for the unforeseen
costs like if a car breaks down and needs repairs.




INSMAT final materials                                                           31/10/03
4.4   Task 15 – Future Financial Needs

Consider the following table below and try and estimate where in life you are
situated. Also do your best to estimate how much more or less money you will need
at each of the life stage. Think about what your responsibilities will be.




Financial
Requirements
            Large




                 Medium




                 Low


                            20     30      40     50     60     70
                            Age
                                   Graph:         A Persons Life Cycles and his
                                                  financial requirements




INSMAT final materials                                                     31/10/03
In each block provided indicate why the financial life cycle says you will require different amounts of money, for example, when you are in 20’s
you don’t need a lot of money because you live with your parents, don’t have children and have a small car. Do this relation to your own life .

    Financial                                                                Age
  Requirements




                    20               30                  40                    50                   60                    70+
Small




Medium




INSMAT final materials                                                         31/10/03
Large




INSMAT final materials   31/10/03
4.5   Personal Goal-Setting
Personal goal-setting is crucial when you are planning for the future. Because your
financial affairs will have an impact on every other area of your life, it is critical to
know how it fits into your life and whether it allows you to reach your other goals. Two
of the benefits you will receive as a result of defining and aligning your major goals in
life are peace of mind and focus. Let us take a look at a few of the other benefits of
personal goal-setting:
                  Know, be, do and have more
                  Use your mind and talents fully
                  Have more purpose and direction in life
                  Make better decisions
                  Be more organized and effective
                  Do more for yourself and others
                  Have greater confidence and self-worth
                  Feel more fulfilled
                  Be more enthusiastic and motivated
             
Remember, you will not pay a price for setting goals. You will pay a price for not
setting them. We can choose to get caught up in the everyday activity of our lives
without feeling any real sense of purpose or we can choose to accomplish something
meaningful with our lives that give us a sense of direction and self-motivation.

                  Ninety-seven percent of the population does not set goals for
                  two major reasons: (1) FEAR (False Evidence Appearing Real)
                  is preventing them from doing so and (2) There is a risk that the
                  goal may not be reached.

One question a lot of women ask is how to know if a goal is good or bad. In other
words, how do you discriminate between the really important goals and the “nice to
have” but not really important ones?

You will know whether or not a goal you have chosen is important by answering
these five questions.
                  Is it really MY goal?
                  Is it morally right and fair?
                  Are my short-range goals consistent with my long-term goals?
                  Can I commit myself emotionally to completing the project?
                  Can I visualize myself reaching this goal?

If you have answered “No” to even one of these questions, you may want to
reconsider this goal. In the short-term it may appear to work for you, but in the long
run, you may be exposing yourself to a lot of unnecessary conflict and frustration.




INSMAT final materials                                                                31/10/03
Be sure to set big goals as well as multiple goals. Big goals force you to reach in and
use the potential that is inside of you. Long-range goals help you to overcome short-
range failures. They can also help you to change your direction without going back
on your decision.

Whether or not they ever reach the goals they have set, people who set big, long-
range goals have been found to have higher self-confidence, higher self-esteem, and
greater personal motivation. The bottom line is that more than half the rewards and
benefits achieved from goal-setting come from actually taking your first step in that
direction, regardless of the consequences.

There is a very simple process in seven steps that you can go through to set any
goal whether personal or professional. To be effective, the goal you choose must
include all seven of the following steps:




INSMAT final materials                                                          31/10/03
4.6   Task 16 – Seven Steps of Goal Setting.


– Allow the learner to work on a separate sheet of paper if necessary.
•       Identify your goal by writing it down

____________________________________________________________

____________________________________________________________

•       Set a deadline for the achievement. Put a date on it.

____________________________________________________________

•       List the obstacles to overcome in accomplishing your goal.

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

•     Identify the people and groups you need to work with to reach your
goal.

____________________________________________________________

____________________________________________________________

____________________________________________________________

•      List the skills and knowledge required to reach your goal. What do you
need to know?

____________________________________________________________

____________________________________________________________

•       Develop a plan of action to reach your goal.

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

•       Write down the benefits of achieving your goal. (“What is in it for me?”)

____________________________________________________________

____________________________________________________________

____________________________________________________________




INSMAT final materials                                                     31/10/03
On a periodic basis, it is important to re-evaluate your goals to make certain that they
are in alignment with what you truly value and want out of life. Remember, goal-
setting is a life-long process. Once you have completed one goal, be sure to replace
it with something else. This way you will always reap the benefits that goal-setting
provides.




INSMAT final materials                                                          31/10/03
4.7   Task 17 - Establishing your future financial needs.
Now that we have established what your life cycles are going to encompass and what your future goals are , consider the costs of this. In the
table below, take a look at your own life stages and estimate what you are going to need on a monthly basis to keep your ”head above water”.
When you are finished with this think about how you are going to accomplish this requirement.

Life Stage          Financial Source             Financial Requirement (Rands)     Living Deficit and reason        Plan for future


20                  For Example - Salary         R2500 per month                   None – earning enough money to   Savings, Unit trusts and pension
                                                                                   support current needs            scheme contribution


30




40




50




60




70+




INSMAT final materials                                                           31/10/03
4.8       Task18 - Financial Modelling

Build a model of something that illustrates a medium -term need and then Prepare a
speech on how you are going to afford it. (Remember that a medium -term need is a
need between 6 months and 5 years.) Use the following points in your speech.

          Research how much it is going to cost you.
          Estimate the time you want it in.
          Calculate how much you must save monthly to achieve your need in that time
          span.
          Do not forget to include your hidden costs e.g. Lawyers fees, transfer costs.
          Justify your need.




INSMAT final materials                                                           31/10/03
4.9       Budget

A Budget is a plan of how income is spent. It is also a record of how the income was
spent. It forces one to make choices

          One can plan for the future.
          It must be realistic
          Income must always exceed expenditure.
          Pay your Short, medium and long term needs first.

4.10 Free money for saving

Short, medium and long - term savings must be itemised under expenditure.
This is money that is spent on yourself, therefore spending must be curtailed in order
to free money for savings.

4.11 Task19 - Savings
In a group suggest a way in which spending can be reduced. Make notes for your
self.




INSMAT final materials                                                         31/10/03
4.12 Self Reflection

Take five minutes to think about what you have just read and learnt. Try and apply it
to you own situation. Make a note for your self about areas you would like to think
about and further address in you own life.




INSMAT final materials                                                         31/10/03
5 Specific outcome 4: Compile a personal budget for the
  next 3 months, to manage own money
Learning Outcomes

1.      The monthly income for a household is calculated based on total income from
        all the economic activities of the household.

2.      The total of all deductions, including tax, is calculated and deducted from the
        income.

3.      Monthly fixed payments are calculated for own budget.

I4.      In terms of income, and fixed, variable and discretionary payments are
        summarised in categories in own personal budget.

5.      Daily, weekly and annual income and expenses are converted to monthly
        expenses in order to complete a budget.

6.      A decision is made and an action plan drawn up to balance own income and
        expenditure by reducing expenditure or increasing income.

7.      A household budget for the next three months is compiled using the standard
        format.

8.      Actual expenses for one month are compared to the budget for the same
        month, and the reasons are explained for any variance.

9.      Possible unexpected occurrences are listed and their financial consequences
        discussed, with reference to own circumstances.

10.     A reasonable amount of saving for unexpected events is included in one’s
        own budget.

11.     Unexpected changes to one’s income or expenditure are considered and
        decisions are made about how to adapt the budget to accommodate such
        changes.




INSMAT final materials                                                           31/10/03
5.1   Task 20 - An emergency fund comprehension

Everyone needs to save for an emergency fund. It bails one out of trouble and gives
peace of mind. An emergency fund is at least equal to 3 months salary.

Another name for an emergency fund is a fund for unforeseen happenings, events
that we really do not wish to occur.

An example would be if one is retrenched from your job and it takes 2 to 3 months to
find another suitable job. In the meantime needs have to paid i.e. rent, electricity,
telephone; food costs (fixed and variable expenses) even if one is careful not to
spend money on wants (discrepancy expenses) you still have to live.

1) Why does one have to save for an emergency fund?
One has to save for an unforeseen happening




 2) How much constitutes an emergency fund?
It constitutes 3 months salary




3) Define an unforeseen happening and give your own example?
 An unforeseen happening is something unexpected occurs. e.g. cell phone is
stolen




4) If you are retrenched give an example of a need that is a fixed cost?
Rent




5) Why does an emergency fund give you peace of mind?
 If one need money to get out of trouble, it is there




INSMAT final materials                                                       31/10/03
5.2   Household income

All sources of income are calculated into a total income, for example,

Income                    R 2000.00
Part time income          R 500.00
Room rent                 R 400.00 +
Total income              R2900.00

5.3   Deductions

The employer deducts tax according to government scales. This is a compulsory as
determined by the government. Tax tables are set out every year and handed to
employers once a year.

5.4   Monthly fixed payments

This includes payments that do not change from month to month.

Example:-

Rent                          R800.00
Car loan repayments           R400.00
Rates and Taxes               R300.00 +
Total                         R1500.00

5.5   Categories

When developing a budget it is usual to categorise income, Fixed, variable and
discretionary payments into different areas of the budget. This allows us to be very
detailed and know, not only by expense, but by category, what our incomes and
expenses are.


5.6   Weekly income

Daily, weekly, annual income and expenses are converted to monthly expenses in
the budget




INSMAT final materials                                                         31/10/03
5.7   Net Surplus or Net Deficit

The net surplus is a term used to tell us that you have more income than expenses,
and the net deficit is the term used to tell us you have more expenses that income.

Obviously when you are in a net deficit situation, we have a problem as you are
spending more than you are earning. In this situation, you are required to put in place
plans very quickly, to try and stop this situation.

The question, of course is how do you do this?

Step 1 is always to examine your total situation. Once you have an overall picture
you are able to determine where you can start to save money. In some months, when
you have large payments, for example - school fees, you make need to make
provision for this, but this can only be done if you have savings.

Other situations may require your to look to your emergency fund, as the expense / s
may be unforeseen.

Step 2 is to look to somebody to help you, not necessarily lending you money, but
allowing you to pay off a debt more slowly or over an extra month. This is not always
the best option as this may lead to you being charges interest and thus, in the end,
paying more for the expense than what you originally budgeted.

But is not a good idea to approach a loan shark or borrow from your employer based
on next months salary, because all this is going to do is to place a extra strain on
next months budget and you will have nowhere to go but downwards.

Step 3 is to look to the future and not let yourself get into a situation – live within your
means and don’t let the furniture shops and the other trade stores get to a situation
where you are not able to pay all of them, what you owe, on a monthly basis.




INSMAT final materials                                                              31/10/03
5.8   Example and Task 21 - Compile a Budget

In the following exercise you are given a number of incomes and expenses. The
objective of the exercise is compile a budget

Required to do?

Compile a Budget for the month of January

Step 1 – Identify which are fixed and variable expenses and discretionary expenses

Income

A salary of R5 000 (after tax) plus R500 per month for temporary work.

Expenses (Fixed)

Rent                                R500
Church levy                         R20
Medical aid                         R800
Donation to S.P.C.A.                R10
Insurance                           R300
Furniture repayment                 R50
Union contributions                 R20
School fees                         R80
Car license                         R140

Expenses (Variable)

Transport                           R150
Entertainment                       R700
Electricity                         R400
Clothing                            R250
Telephone                           R150
Presents                            R100
Food                                R800
Sundries                            R100
Meat                                R200
Store account                       R60
Repairs and maintenance             R100

Savings

Short-term D.V.D. player            R250
Medium term – car                   R200
Long term – flat                    R500




INSMAT final materials                                                      31/10/03
Now complete January’s budget

Details                                 Income        Expenses    Totals
Income
Source                                  R5 000
Source                                  R 500                     R5500

Savings
Short term goals- DVD                                 R250
Medium term goals- car                                R200
Long term goals- flat                                 R500
                                                      Subtotal    R950
Fixed expenses
Rent                                                  R500
Medical aid                                           R800
Insurance                                             R300
Furniture repayments                                  R 50
Union contributions                                   R 20
School fees                                           R 80
Car license                                           R140
                                                      Subtotal    R1890
Variable expenses
Transport                                             R150
Electricity                                           R400
Telephone                                             R150
Food                                                  R800
Meat                                                  R200
Store account                                         R 60
Repairs and maintenance                               R100
                                                      Subtotal    R2060
Discretionary payments
Church levy                                           R 20
Donation to S.P.C.A.                                  R 10
                                                      Subtotal    R 30
Discretionary expenses
Entertainment                                         R700
Clothing                                              R250
Presents                                              R100
Sundries                                              R100
                                                      Subtotal    R1150
Total Expenses                                                    R6080
Net Deficit (Income less expenses)                                (R580)

Did the budget balance? No

What caused the budget not to balance? Expenditure was too high

What can be change to make it balanced? Discretionary expenses



INSMAT final materials                                                   31/10/03
Now compile and estimate the following budget for the month of February

Income

A salary of R1 500 per week (after tax) plus R800 per month for temporary work

Savings

Short term – Fridge                R50 per week
Medium term – car                  R100 per week
Long term – education policy       R150 per month

Fixed Expenses

Rent...                            R150 per week
School fees                        R80 per month
Insurance                          R160 per month
Hospital plan                      R200 per month
T.V license                        R208 per year
Union contribution                 R25 per month

Variable Expenses

Transport                          R50 per week
Electricity                        R75 per week
Meat                               R 60 per week
Food                               R 200 per week
Milk                               R25 per week
Store account                      R30 per month
Repairs and maintenance            R100 per month

Discretionary payments

Book club                          R10 per week
Donation to grandmother            R50 per week

Discretionary Expenses
Estimate how much money should be spent on clothing, entertainment and sundry
expenses
Now calculate how much money should be spent on Discretionary expenses.
.
Remember the budget must balance.




INSMAT final materials                                                     31/10/03
Budget for February

Income
Source                         R6000
Source                         R 800

Savings
Short term – Fridge                            R 200
Medium term – Car                              R 400
Long term – education policy                   R 600
                                               Subtotal   R1200
Fixed Expenses
Rent                                           R600
School fees                                    R 80
Insurance                                      R160
Hospital Plan                                  R200
T.V.license                                    R208
                                               subtotal   R1248
Variable expenses
Transport                                      R200
Electricity                                    R300
Meat                                           R240
Food                                           R800
Milk                                           R100
Store account                                  R 30
Repairs and maintenance                        R100
                                               Subtotal   R1770
Discretionary payments
Book club                                      R 40
Donation – grandmother                         R200
                                               Subtotal   R240
Discretionary expenses
Clothing                               R 900   R 1000
Entertainment                          R 500   R 750
Sundries                               R 500   R 592
                                               Subtotal   R2342
Total Expenses                                            R 6800
Net Surplus / Net Deficit                                 R0




INSMAT final materials                                      31/10/03
5.9     Summative Assessment 2

Using the format that we have described above or your own that is similar to these,
compile and calculate a budget for March, in the following steps.

      1. Determine the various categories of incomes and expenses that you would
         incur in one month. Make a note of these on you budget. Don’t forget to
         include in your budget an amount for an emergency fund.
      2. Now estimate or guess what these costs should be on a monthly basis.
      3. Using the slips and receipts that you were asked to collect at the beginning of
         the course. Fill in the actual expenses incurred during the month.
      4. Determine the variance for yourself.
      5. Answer the following questions.


Give a reason for the variance between Estimated expense and Actual Expenditure




Looking at your budget is there any way that you could plan your expenses a bit
better, thus allowing you a bit more free money on a monthly basis.




Allowing for savings and allowing for your budget to be flexible enough so that when
things do change, you can adapt is one of the key stone points of any budget. Did
you allow for this and if not, how are you going to allow for it in future.




INSMAT final materials                                                           31/10/03
INSMAT final materials   31/10/03
5.10 Self Reflection

Take five minutes to think about what you have just read and learnt. Try and apply it
to you own situation. Make a note for your self about areas you would like to think
about and further address in you own life.




INSMAT final materials                                                         31/10/03