Commercial Mathematics • Topic 2 of 3

Savings and Budgeting

What is a Budget?

A budget is a plan for how to spend and save money. It helps track income (money coming in) and expenses (money going out).

Parts of a Budget:

PartDescription
IncomeSalary, allowance, gifts, earnings
Fixed ExpensesRegular costs (rent, bills, loan payments)
Variable ExpensesChanging costs (groceries, entertainment)
SavingsMoney set aside for future goals
Emergency FundSavings for unexpected needs

The 50/30/20 Rule for Budgeting:

  • 50% for Needs (rent, food, utilities)
  • 30% for Wants (entertainment, dining out)
  • 20% for Savings & Debt (savings account, loan payments)

Why Save Money?

  • Emergency fund (medical, car repairs)
  • Short-term goals (buying a bike, laptop)
  • Long-term goals (college, house down payment)
  • Future financial security

Simple Savings Plan:

  1. Decide a savings goal
  2. Calculate how much to save each month
  3. Set up automatic transfer to savings account
  4. Track progress regularly
Savings, Budgeting and the 50-30-20 Rule₹5,000Needs50%₹3,000Wants30%₹2,000Savings20%₹10,000Savings Goal: Pay yourself first — set aside 20% before spendingCompound Growth: ₹2,000/month at 8% p.a. → ₹2.96L in 10 years
Solved Examples
1
Worked Example

A student earns ₹2000 pocket money per month. He spends ₹800 on food, ₹300 on travel, ₹400 on entertainment, and saves the rest. How much does he save per month?

Solution
  • Total expenses = \(800 + 300 + 400 = ₹1500\)
  • Savings = Income - Expenses = \(2000 - 1500 = ₹500\)

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Answer: ₹500 **Example 2:** Riya wants to save ₹15,000 in 10 months. How much must she save each month? *Solution:* - Monthly savings = Total goal ÷ Number of months - $15000 \div 10 = ₹1500$ per month - **Answer:** ₹1500 per month **Example 3:** A family has monthly income ₹60,000. According to the 50/30/20 rule, how much should go to needs, wants, and savings? *Solution:* - Needs (50%): $60,000 \times \frac{50}{100} = ₹30,000$ - Wants (30%): $60,000 \times \frac{30}{100} = ₹18,000$ - Savings (20%): $60,000 \times \frac{20}{100} = ₹12,000$ - **Answer:** Needs ₹30,000, Wants ₹18,000, Savings ₹12,000

Key Points

  • A budget tracks income and expenses to manage money
  • Fixed expenses stay the same; variable expenses change
  • The 50/30/20 rule is a simple budgeting guideline
  • Savings help achieve short-term and long-term goals
  • Always spend less than you earn to save money
Quick Check — 4 MCQs
Tap an option to check your answer0 / 4
Q1.Savings $=$
Explanation: Income minus expenses.
Q2.A budget is a plan for income and:
Explanation: Spending.
Q3.In a budget, ___ come before wants.
Explanation: Needs first.
Q4.Spending less than you earn lets you:
Explanation: Save.
Practice more MCQs → 📝 Assignment · 35 marks