A budget is a plan that compares money coming in (income) with money going out (expenses). What is left over is savings.

Year 11 General Consumer Arithmetic: Personal Finance

Budgeting

Q: How do you calculate savings?

Subtract total expenses from total income. If the result is positive, the budget has a surplus. If negative, it has a shortfall.

Q: What is the difference between gross and net income?

Gross income is the amount before tax is taken out. Net income is what is left after tax. Always use net income for budgeting.

Q: What is the 50/30/20 rule?

It is a guide for splitting net income: 50 percent for needs, 30 percent for wants, and 20 percent for savings. Multiply net income by each percentage as a decimal.

Q: How do you convert monthly expenses to weekly?

Multiply by 12 to get the annual figure, then divide by 52 to get weekly. For example, 120 per month is 120 times 12 divided by 52, which is about 27.69 per week.

Q: How long does it take to reach a savings goal?

Divide the goal by the savings per week. For example, saving 130 per week toward a 3900 goal takes 3900 divided by 130, which is 30 weeks.

10 practice questions 1 video lesson Theory + worked examples

Theory

A budget compares income against expenses, with the difference being savings. Every line in a budget must use the same time period (weekly, monthly, or annual), and net (after-tax) figures are the ones that count. The 50/30/20 rule is a popular guide for splitting net income across needs, wants, and savings.

Income is the money you receive — wages, salary, government payments. Expenses are everything you spend. Savings are what's left over: income minus expenses.

If savings are positive, the budget has a surplus. If negative, it has a shortfall — you're spending more than you earn. Net income is what's left after tax; gross is before tax. Budgeting uses net.

Fixed expenses stay roughly the same each period — rent, insurance. Discretionary (or variable) expenses are lifestyle choices — eating out, subscriptions, entertainment. Discretionary spending is the first thing to cut when savings need to grow.

50/30/20 rule: a common guide that allocates 50% of net income to needs, 30% to wants, and 20% to savings.

Income splits into expenses + savings

Each portion = net income × the percentage

The core budget equation:

savings = income - expenses

savings = income - expenses

Convert any amount to a weekly figure:

weekly = \frac{annual}{52}

weekly = \frac{annual}{52}

Time to reach a savings goal:

weeks needed = \frac{goal amount}{savings per week}

weeks = \frac{goal}{savings/week}

50/30/20 rule: needs = net income ×0.50; wants = net income ×0.30; savings = net income ×0.20.

Periods per year (for converting between time units):

Period	Per year
Weeks	52
Fortnights	26
Months	12
Quarters	4

How to build a budget

Choose one period for the whole budget — weekly, monthly, or annual. Stick to it.
Convert every line to that period using the table above (annual $\div 52$ for weekly, $\times 12 \div 52$ for monthly-to-weekly, etc.).
Add expenses and subtract from income to get savings (or shortfall if negative).

For 50/30/20: multiply net income by 0.50, 0.30, and 0.20 to get the three allocations.

Example 1 — Weekly savings

Lily earns

$ 1,350

net per week. Her weekly expenses are: rent

$ 480

, food

$ 170

, transport

$ 95

, other

$ 210

. How much can she save each week?

Solution

Total her expenses, then subtract from income.

$expenses$	$=$	$480 + 170 + 95 + 210$
$expenses$	$=$	$$ 955$
$savings$	$=$	$1,350 - 955$
$savings$	$=$	$$ 395$

savings = 395

Lily can save $$395$ per week.

Example 2 — Mixed periods

Jay earns

$ 1,400

net per fortnight. His expenses are: rent

$ 320

per week, bills

$ 240

per month, car

$ 1,300

per year. Find his annual savings.

Solution

Convert everything to annual figures.

$income$	$=$	$1,400 \times 26 = 36,400$
$rent$	$=$	$320 \times 52 = 16,640$
$bills$	$=$	$240 \times 12 = 2,880$
$expenses$	$=$	$16,640 + 2,880 + 1,300$
$expenses$	$=$	$20,820$
$savings$	$=$	$36,400 - 20,820$
$savings$	$=$	$$ 15,580$

annual savings = 15580

Jay saves $$15{,}580$ per year.

Example 3 — 50/30/20 rule

Anna's net monthly income is

$ 5,200

. Using the

50 / 30 / 20

rule, find how much she allocates to needs, wants, and savings each month.

Solution

Multiply by each decimal.

$needs$	$=$	$5,200 \times 0.50$
$needs$	$=$	$$ 2,600$
$wants$	$=$	$5,200 \times 0.30$
$wants$	$=$	$$ 1,560$
$savings$	$=$	$5,200 \times 0.20$
$savings$	$=$	$$ 1,040$

2600 + 1560 + 1040 = 5200

Anna allocates $$2{,}600$ to needs, $$1{,}560$ to wants, $$1{,}040$ to savings.

Example 4 — Time to a goal

Liam wants to save

$ 3,900

for a holiday. After his weekly expenses he has

$ 130

left to save each week. How many weeks will it take?

Solution

Divide the goal by the weekly savings.

$weeks$	$=$	$\frac{3,900}{130}$
$weeks$	$=$	$30$

weeks = 30

Liam will reach his goal in $30 weeks$ .

Common pitfalls

Mixing periods. Adding "

$ 320

per week" and "

$ 240

per month" as if they're the same number gives a meaningless total. Convert everything to one period first.

Using gross instead of net. Always budget with net (after-tax) income unless told otherwise — tax is already gone before you can spend it.

$$ 120$ per month is not $$ 30$ per week. The correct conversion is

120 \times 12 \div 52 \approx $ 27.69

per week. Don't divide monthly by

4

— there are more than

4

weeks in a month.

Forgetting irregular expenses. Annual bills (car rego, insurance) need to be spread across the budget period, not ignored because they're not weekly.

Frequently asked questions

What is a budget?

A budget is a plan comparing income with expenses. Whatever is left over is savings — a surplus if positive, a shortfall if negative.

How do you calculate savings?

Subtract total expenses from total income for the same period. $savings = income - expenses$ .

What is the difference between gross and net income?

Gross income is the figure before tax is taken out. Net income is what reaches your bank account after tax. Budgeting always uses net.

What is the 50/30/20 rule?

A rule of thumb that splits net income: $50 %$ on needs, $30 %$ on wants, $20 %$ on savings. Multiply income by each decimal to get the dollar amount.

How do you convert monthly expenses to weekly?

Multiply by $12$ (months in a year) then divide by $52$ (weeks in a year). For $$ 120$ per month: $120 \times 12 \div 52 \approx $ 27.69$ per week.

How long does it take to reach a savings goal?

Divide the goal by the savings per week. A $$ 3,900$ goal at $$ 130$ per week takes $3,900 \div 130 = 30$ weeks.

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