FNSFLT201A
Develop and use a personal budget

This unit describes the performance outcomes, skills and knowledge required to develop, implement and monitor a personal savings budget.No licensing, legislative, regulatory or certification requirements apply to this unit at the time of endorsement.

Application

This unit has wide application and may be used in workplaces, schools, adult and community learning organisations or registered training organisations in order to build the financial literacy of learners. The unit may also be used as part of pre-vocational or new apprenticeship programs or as part of services provided by counselling or advisory organisations.


Elements and Performance Criteria

ELEMENT

PERFORMANCE CRITERIA

1. Analyse and discuss budgeting as a financial tool

1.1. The role of budgeting in the lives of different groups and the importance of budgeting appropriately to meet expenses is analysed and discussed and related to different stages of life

1.2. The importance of setting financial goals is analysed and discussed

1.3. Obstacles that might prevent financial goals being achieved are analysed and discussed with the types of behaviours and skills required for successful budgeting explored and analysed

2. Develop a personal budget

2.1. All income and expenses for a six month period are recorded to assist in estimating expenditure requirements

2.2. A spreadsheet for recording all budget information is obtained or developed and established to record income and expenditure for a relevant period of time

2.3. All sources of income and regular fixed expenses and variable expenses for the specified period are identified and listed in a personal budget using the budget spreadsheet

3. Develop a personal budget

3.1. Total expenses recorded are subtracted from the total income to determine a surplus or deficit budget for the specified period

3.2. Reasons for a deficit budget are explored if relevant and ways to reduce expenses or increase income are investigated

3.3. Allocation of surplus funds towards saving and meeting identified financial goals is explored

4. Implement and monitor the personal budget

4.1. The budget is followed according to plan for a period of time

4.2. Actual expenses and income for the period during which the budget is implemented are recorded and compared to budgeted expenses and income with any differences in budgeted and actual amounts looked at and the budget modified where necessary

4.3. Handy hints for managing the personal budget are discussed

4.4. Ongoing review of the budget is conducted to ensure it remains relevant and to ensure updates are incorporated if necessary

Required Skills

Required skills

communication skills to:

clearly explain budgeting principles

use questioning to develop clear understanding

liaise with others, share information, listen and understand

use language and concepts appropriate to cultural differences

numeracy and IT skills to:

calculate interest and loan repayments and surplus or deficit funds

use a calculator

useinternet information

literacy skills for interpreting relevant information

learning skills to maintain knowledge of budgeting and saving techniques

Required knowledge

principles of budgeting

role of credit and savings in establishing personal wealth

understanding of the financial institutions and their savings products

Evidence Required

The Evidence Guide provides advice on assessment and must be read in conjunction with the performance criteria, required skills and knowledge, range statement and the Assessment Guidelines for the Training Package.

Overview of assessment

Critical aspects for assessment and evidence required to demonstrate competency in this unit

Evidence of the ability to:

explain the benefits and purposes of budgeting

prepare a budget spreadsheet

explain the difference between fixed and variable expenses

prepare and implement a personal budget.

Context of and specific resources for assessment

Assessment must ensure:

competency is demonstrated in the context of the the range statement

access to and the use of a range of common office equipment, technology, software and consumables

access to information about the budgeting process, personal financial records, software and other relevant resources.

Method of assessment

A range of assessment methods should be used to assess practical skills and knowledge. The following examples, in combination, are appropriate for this unit:

evaluating an integrated activity which combines the elements of competency for the unit or a cluster of related units of competency

verbal or written questioning on underpinning knowledge and skills

setting and reviewing simulations or scenarios

group discussion to determine and confirm understanding.

Guidance information for assessment


Range Statement

The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

The different groups who may budget may include:

families

governments

individuals:

single

married

elderly

students

tourists, travellers.

Different stages of life may include:

approaching and during retirement

buying your first home

moving out of home

starting a family

studying.

Financial goals may include:

accumulating a set amount of money by a specified date in the future for the purposes of:

purchasing assets

financing holidays, educational expenses, home renovations and other known future expenses

establishing a deposit for an investment such as a home or investment property

aiming to repay existing debts and be debt free

establishing a regular savings plan

handling income and expenditure responsibly and avoiding financial difficulties.

Obstacles that might prevent financial goals being achieved may include:

being unemployed, particularly long term unemployed

insufficient income to afford items that are beyond the individual's means

unexpected circumstances such as:

losing a job

falling ill

not being able to work.

Behaviours and skills required for successful budgeting may include:

controlled spending

disciplined approach to money

organisational skills

record keeping skills.

Budget refers to:

a calculation of all projected income and expenditure for period of time (e.g. on a weekly or monthly basis)

showing all projections versus actual income and expenses for the period and monitoring variances.

A spreadsheet may:

be simple or complex depending upon the extent of the individual's finances

have one section for recording all money received as income and another section for expenses both variable and fixed

have a section to record the difference between income and expenses for the period, this being the surplus or deficit financial situation for the period.

Sources of income may include:

interest on investments, dividends

proceeds from sale of assets

social security benefits, pensions, allowances, child assistance

wages, commission, bonuses, tips.

Fixed expenses may include:

fees:

school and university fees

bank fees

insurance

loan repayments (if loan is based upon fixed interest rates) such as:

personal loans

car loans

credit card debts

Higher Education Contribution Scheme (HECS)

public transport

rates

rent

subscriptions to:

magazines

newspapers

clubs

travel including public transport, petrol

Variable expenses may include:

car maintenance

living expenses such as:

food

clothing

medical

loan repayments if loan is based upon variable interest rates

miscellaneous expenses such as:

gifts

recreation

entertainment

fines

mobile telephone

mortgage repayments

utilities such as:

water

gas

electricity

telephone.

Ways to reduce expenses may include:

comparing prices for essential items

monitoring use of utilities such as electricity, gas and water

moving back home

reducing expenditure on discretionary items such as expensive clothing, magazines, eating out

share accommodation

using cheaper modes of transport.

Ways to increase income may include:

combining part-time work with studying

investigating eligibility for student allowances or other relevant government benefits

taking on a part-time job or holiday work.

Handy hints may include discussing:

how to avoid getting into financial difficulties

how to minimise fees and charges imposed by financial institutions

how to use credit card debt effectively

the problems of impulsive buying, particularly when under peer pressure

ways to cut back on spending or change negative spending habits.


Sectors

Unit sector

Financial literacy


Employability Skills

This unit contains employability skills.


Licensing Information

Not applicable.