3.4. Your university friend, Katy, wants to set up a budget for her monthly expenses. Explain to Katy how setting up a budget can help her manage her money effectively. - 1 mark.
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3.5. After understanding the importance of budgeting, identify THREE essential components that Katy should include in her monthly budget. – 3 marks
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Setting up a budget can help Katy manage her money effectively by providing a clear overview of her income and expenses. This can help her track where her money is going, identify areas where she may be overspending, and make necessary adjustments to reach her financial goals.
Three essential components that Katy should include in her monthly budget are:
1. Income: Katy should list all sources of income, such as wages, bonuses, or any other sources of money coming in each month.
2. Expenses: Katy should categorize her expenses, including fixed expenses (e.g. rent, utilities) and variable expenses (e.g. groceries, entertainment). This will help her see where her money is going and where she may need to cut back.
3. Savings: Katy should allocate a portion of her income towards savings to build an emergency fund, retirement savings, or any other financial goals she may have. Making savings a priority in her budget will help her secure her financial future.