Analysing a financial budget
As a starting point, let’s look at a simple example to understand the concept of financial management and risk.
Imagine a family and how they might manage their income.
Mark Griffiths and his wife live with their three children in a house they own in the UK. Mark is currently working as an IT engineer, taking home a monthly income of £3000. The table below depicts their monthly budget and outgoings.
Monthly income and spending for the Griffiths family
|Total monthly income||£3000|
|Monthly mortgage and household bills||£1400|
|Car and other travel||£170|
|Cinema, takeaways, leisure activities||£110|
|Food and household goods||£450|
|Home contents insurance||£0|
|Total monthly spending||£2600|
The above table represents a particular month of spending in the Griffiths household. In terms of covering the cost of unexpected life events, do you feel they are taking any risks with the distribution of their finances?
Consider what could happen to Mark’s financial position if the family finds themselves in the following circumstances listed below:
- Mark’s wife has an accident which leaves her unable to work
- Mark is made redundant
- The family car breaks down
Imagine you are a financial advisor. You have been asked to look at the family’s finances and draw up a revised budget.
Taking into account unexpected events, is there anything you would change to their initial budget above?
Share your ideas and thoughts with your fellow learners.
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