# Making a Budget: Personal Finance - Grade 11

Subject: Personal Finance

Lesson Objective: To successfully create a monthly budget.

Common Core Standard: CCSS.ELA-LITERACY.RI.11-12.7 - Integrate and evaluate multiple sources of information presented in different media or formats (e.g., visually, quantitatively) as well as in words in order to address a question or solve a problem.

• Calculator
• Projector

## Starter:

Say: Today, we will learn how to create a budget. Budgets are a way to understand all incoming and outgoing cash. This allows you to control spending and avoid a deficit.

## Main:

Say/Do:

• Use the projector to write out all the information below so that all students may see and follow along.
• Because you'll be graduating high school next year, I will assign you a job position you would be qualified for. You will be working at a local coffee house serving customers and pouring coffee. This is not a tipped position. The federal minimum wage is \$7.25 per hour, but many states have a higher minimum wage than the federal mandate. The average minimum wage in 2020 was \$11.80 per hour. We will be using that number for this assignment.
• If we take your hourly rate and multiply this by the number of hours you work each week, we will find out your gross earnings. Gross earnings occur before taxes are collected from your wages.
• \$11.80 x 38hrs = \$448.40
• Now that we have our weekly gross pay, we need to account for the federal and state taxes that the government takes out before the boss hands us our paychecks. We will use 4% as the percentage your state will take out in income tax for this demonstration. In addition to state income tax, there is also a federal income tax to account for. We will use the lowest tax bracket of 10%. To understand what that means for our paycheck, we need to understand how to find a percentage. \$448.40 is the total number we wish to find a percentage for. 4% is the number we need to know.
• 4 x 448.40 = 1,793.60
• 1,793.60 / 100 = \$17.93
• As a result, the amount of state taxes would be \$17.93. For the federal tax, we would follow the same formula.
• 10 x 448.40 = 4,484
• 4,484 / 100 = \$44.84
• Then we would add the two percentages together:
• \$17.93 + \$44.84 = \$62.77
• We would then subtract the total taxes from our weekly gross pay.
• \$448.40 – \$62.77 = \$385.63
• The amount you would bring home weekly would then be \$385.63. To find our monthly gross income, we simply multiply that by 4, as there are four weeks per month.
• \$385.63 x 4 = \$1,542 per month.
• Now we must account for money leaving. The primary expense is housing. As of the end of 2019, the average cost for a one-bedroom apartment was just over \$1,000 per month. As many of you will likely experience, a roommate is a practical way to cut down costs. Therefore, I will give you one for this experiment. The average two-bedroom apartment runs for a little over \$1,300. As one bedroom in this apartment is larger than the other, you and your roommate will decide that whoever takes the larger space should pay a larger portion of the rent. To save money, you choose the smaller room. You decided on a 60/40 split of rent costs.
• 60 x \$1300 = 78,000
• 78,000 / 100 = \$780
• \$1,300 - \$780 = \$520.
• Your monthly rent would be \$520.00. We then take our net earnings and subtract rent from that amount.
• \$1,542 - \$520 = \$1,022.00
• That is the remaining amount we have to get through the end of the month. Now say we have a car payment as well. We pay a hearty \$150 a month to the bank.
• \$1,022 - \$150 = \$872.00
• Living on your own, you now carry your own car insurance. Because you are a young driver, your insurance payments are much higher than the national average. Your local company has given you a rate of \$432.50 per month.
• \$872.00 -\$432.50 = \$439.50
• You are left with \$439.50.
• To drive our car, we also need to fuel it. You live a distance from your job. Because you have a small size sedan, we can assume you drive through one tank of gas each week. Your car has a 10-gallon gas tank, and gas costs \$2.77 per gallon.
• \$2.77 x 10 = \$27.70
• \$27.70 x 4 = \$110.80
• \$439.50 – 110.80 = \$328.70 for the remainder of the month.
• The apartment you rent with your roommate does not cover all utilities. You have a monthly bill of \$139.56 for electricity. You decide to split that utility evenly.
• \$139.56 / 2 = \$69.78
• \$328.70 - \$69.78 = \$259.92
• Now that you've paid the bills, we must purchase groceries.
• Allow for the class to decide on a grocery budget. For this example, we will use \$50 per week.
• \$50 x 4 = \$200
• \$259.92 - \$200 = \$59.92
• This budget leaves out expenses such as internet and laundry-mat fees, as well as personal expenses. Under this budget, they are not affordable.

## Feedback:

Say:

• What questions do you have about things you need to include in a budget? Allow time for answers.
• I would like each of you to go online and search for a job to apply for. You must meet the minimum requirements for the position. Use the salary offered. If none is listed, find an average salary for this position online. Then decide if you are going to school or entering the workforce. If you are going to school, account for 40 hours per week in which you are in classes and cannot attend a job.
• Using the averages from our example (rent, electric, gas, food, and taxes), calculate how much you would gross, net, and spend per month. Once you have done your budget, explain what, if any, changes you would make the following month to increase savings or reduce your losses.

Written by Amber White

Education World Contributor