Consumer Awareness Module
Unit 2: Managing Personal Finances

Lesson 1: Creating a Personal Budget

This activity involves creating a pie chart representation of a monthly budget. As students do so, they estimate the percentage that they spend on various things (transportation, housing, food, etc.) and evaluate spending and savings priorities and options.
If your students are already proficient with percentages, however, you may want to go directly to Lesson 2, Making Budget Decisions.

Materials Needed:

• Flipchart/newsprint paper or board and markers
  
• Computers with Internet access
  
• Handout 1, My Personal Budget (PowerPoint document)

Introductory Activity: Talking about Budgets

Whole group discussion

• We are going to look at a personal budget. How would you explain what a budget is?

Activity 1: Reading a pie chart

• Many people think that when you talk about a budget, you use just math. That's not true--you can also use pictures to talk about a budget. We're going to use a picture today. It's called a pie chart because it looks like a pie.

Depending on the level of your students, you may need to spend more time illustrating the concept of percents by drawing pies on the board with different numbers of pieces. As a full-class or small-group exercise, you could have students try and label the percent that each piece represents (e.g., each piece of a 5-piece pie is 20%).

• Let's draw a pie on the board. All of the pieces in the pie add up to 100 percent. If I cut the pie in half, each piece is 50 percent of the pie. If I cut the pie in four pieces, each piece is what percent of the pie?
   
• Now let's imagine that this pie represents our monthly budget. Each part of the pie is the part of the budget that we regularly spend on something, like food or rent. Let's look at Handout 1, My Personal Budget. What percent of my budget do I spend each month on housing? Housing and utilities together? Food?

You can increase the complexity of this activity for your students by giving them a figure for the monthly budget (e.g., $2,000) and having them calculate how much money each piece of the pie represents (e.g., Housing, 30%, $600.)

• Look at the pie chart in Handout 1. Which piece of the pie do you think represents housing? Above that piece, write the word "Housing" and draw a line from the word to the piece.

  You may want to debrief by having students discuss the pie chart itself: What is the first thing you notice when you look at the pie chart? Does the pie chart make it easier to understand what the expenses represent?
   

• Take a few minutes to label the other pieces of the pie chart, and then compare your handout with a partner's. Did you label your handouts in the same way?

  Activity 2: Evaluating expenses
  

• With a partner, look at the expenses listed on Handout 1 and answers the discussion questions aloud.
• Learners' Discussion Questions: (These can be read aloud or written on the board.)

  1. One of the expenses on the pie chart is "other." What kinds of things do you think this includes? In your life, what things would you list as "other"?

As you debrief, you can have each pair list one "other" expense on the board. The class can then discuss whether those expenses should be listed as "other" or in another category of expenses.

2. There is no piece of the pie for a savings account. Imagine that the person who has this budget wants to start saving money for a house or new car. How can she save money? What would you tell her? For example, are there any expenses that she could try to reduce? Think of a plan for her to save money.

You may want to have each pair share their savings plan; after discussing the merits of and potential problems with each plan, the class can vote on the best one.

It might be necessary to remind students that their pie charts should reflect percents of a monthly budget--not dollar amounts.

Activity 3: Making a pie chart of your budget

• Next, estimate the percent that each expense represents--for example, housing, 35%.
• Draw a pie chart like the one on Handout 1. Each piece should represent one of your expenses.
• When you finish, answer the Reflection Questions.

• Learners' Reflection Questions: (These can be read aloud or written on the board.)

Because these reflection questions pertain to personal finances, students should not be pressured to share their responses with other students.

1. Was there anything that surprised you when you made your pie chart? If so, what?

2. Look at your expenses. Would you like to reduce any of them or change the way you spend money?

3. Think of a personal budget plan for yourself. How will the expenses on your pie chart look in the future? What will you do differently in your spending and saving?

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