Ma20-3 Lesson 2
Lesson 2: Displaying a Budget
The budgeting process is a necessary part of planning for individuals,
businesses, and governments. To clarify budget estimates, businesses
and governments both use graphs. One of the principal graphs used is
the circle graph or pie graph. This form of graph is used to show how
the money is divided. The following illustration is a pie graph used by
the Northwest Territories government to outline its spending
estimates for the fiscal year 2011–2012.
A circle graph or pie graph represents the entire circle or pie. The
sectors or wedges of the pie indicate the graph divisions. In what
sector does the government of the Northwest Territories estimate it
will spend the largest portion of money?
1 If the percentage values were not shown on the graph, how could
you tell what category Leslie spends the majority of his money on?
2Explain how you can tell that Leslie spends the least amount on
insurance and clothing.
3What do the percentages add up to? Why?
4Leslie’s monthly take-home pay is $4000. How much does Leslie
plan to save each month?
In the following activity you will examine different ways to
create circle graphs......
Geraldine works as a painter. Her take-home pay is $2500 every
month. She has prepared a balanced budget with a goal of
saving $250 every month. Geraldine wants to build her savings in
case there’s a down-turn in the economy and her income drops.
If Geraldine asked you to prepare a circle graph, there are several
choices.
Method 1: Draw the graph using a compass and a protractor.
Click on the link to view How to Make a Circle Graph.
http://www.learnalberta.ca/content/t4tes/courses/senior/math20-3/
mm/m1/m20_3_m1_008/m20_3_m1_008.html
****Please note : On this web page and on a number of web
pages throughout this course, you’ll need to type in a username
and password. Username : LA29
Password : 5780
(it would be a good idea to write this info down and keep it
near your computer...so you have it whenever you need to type
it in***
The following questions apply to the circle graph for Geraldine’s
budget.
Try This 1
What is the sum of all the percentages shown for Geraldine’s
budget? hint
Total all the degrees for each budget sector (wedge). What is this
total? How does knowing this total help you create circle graphs? hint
If Geraldine’s total expenses were $2500 and she spent $500 on
car expenses, what percentage of her budget was spent on car
expenses? hint
What would be the degrees of the sector (wedge) used to represent
car expenses in the circle graph? hint
Method 2: Use a spreadsheet.
Another method to create the circle graph is to use the graphing
feature of a spreadsheet. Watch the information provided in link for
How to Use a Spreadsheet.
http://www.learnalberta.ca/content/t4tes/courses/senior/math20-3/
mm/m1/m20_3_m1_009/m20_3_m1_009.html
1.What similarities do you notice between the circle graphs
created in Methods 1 and 2?
2. What differences do you notice between the circle graphs
created in Methods 1 and 2?
3.How important are these differences?
Self-Check 1
Betty has prepared her personal budget and a pie graph. Betty's
budget is balanced and based on her take-home pay of $2465. One of
her expense categories is food. She budgets $350 for food.
Calculate what percentage of her budget is spent on food. Answer
b)Calculate how many degrees there are in the food sector of her
budget pie graph. Answer
2a)Felix has prepared a balanced monthly budget.
Prepare a circle graph using the method you prefer.
Following is the solution determined from using the spreadsheet in
the lesson. Answer
b)How much more would Felix save if he moved and his rent was
only 35% of his income? Answer
Summary of the first part of the lesson :
In this section you created circle graphs to interpret and clarify
personal budgets. To create a circle graph you needed to
a)calculate what percentage is represented by the expense
b)calculate the number of degrees this percentage is
represented by in a circle
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Section 2: Modifying a Budget
In this section you will investigate the following question:
What are some strategies for modifying a budget to meet
unexpected or changing circumstances?
Analyzing budgets
Important skills you can use to analyze budgets are
estimating & mental math
You can use estimating as a check to see if amounts on your calculator
or on a spreadsheet are reasonable. It is easy to make a mistake when
entering data or by applying the wrong operation. Have you ever
switched two digits by mistake or pressed the division key when you
intended to press the multiplication key? Estimation skills can help you
identify these common errors everyone makes!
Are You Ready?
Use your estimating and mental-math skills to answer the following
questions. Then check your estimates with a calculator. How close were
your estimates?
1.Jeremy wants to save 9.5% of his monthly take-home income
of $2165. About how much money does he wish to save? Answer
Discover
When you are creating a personal budget, be careful not to spend
too much on any single category. If you spend too much money on one
slice of pie, you will have to cut back on the other slices.
Banks and mortgage companies in Canada will not loan you money to
purchase a home if your payments turn out to be more than 44% of
your income.
Spending 44% on housing is a serious strain on most families.
Compare the pie graphs for 44% of income spent on housing and
25% of income spent on housing.
You can see that less money going to housing means more money for
other items in categories such as savings, personal, and entertainment.
Try This 1
Perform a search on the Internet to see what experts on budgeting
and spending recommend as percentages of disposable income. Use
search words such as “Personal Budget Guidelines” or “Personal
Spending Guidelines.”
Explore
It is possible that, depending on their personal circumstances,
different people might want different amounts allocated to the various
budget categories. A person clearing $2000 a month is not likely able
to spend $1000 a month or 50% on rent. However, a person clearing
$6000 may easily handle 50% on housing as this person would have
$3000 of disposable income remaining.
In Explore you will examine several budgets. You will
recommend changes based on spending guidelines and changing
circumstances.
Most experts agree on the following guidelines. You will use this
information to complete Try This 2.
Try this 2
Rod is a carpebter in northern Manitoba. He clears $3200 a month. He
has accepted a new job and his net pay wil be $2500. Rod must revise
his budget to live within his means.
Your task is to balance Rod’s budget. You must follow the expense
guidelines provided in the Spending Guidelines table. Modify Rod’s
budget by
a)entering new dollar values for his change in income
b)making his expenses balance with his new income
Use the Rod’s Budget chart below to balance his budget.
Answer the following questions based on your modifications.
1.By what amount must Rod reduce his expenses?
If you need help answering this question, review the following hints.
hint
2.In Rod’s new modified budget, the expenses need to be reduced.
Suggest changes Rod could make to live within his new budget
Answers will vary. A sample answer is given.
Answer :
Housing costs will be 35% of $4500
= 0.35 x $4500 = $1575.
According to the expense guidelines, her
savings should be a t l e a s t 1 0 % of her
i n c o m e . ---> 1 0 % o f $ 4 5 0 0 = $ 4 5 0 . 0 0
With the noted amounts, Jasmine only has t
o reduce her discretionary income by $175.
O n e p o s s i b i l i t y i s t o r e d u c e t h e
r e c r e a t i o n e x p e n s e b y $ 1 7 5 .
Section summary