A budget is a plan that sets expected income against planned spending. To interpret one, compare the two totals, then use the individual figures to explain the result.
This lesson is part of money, banking and income in SPM Economics. It builds on sources of personal income, because you must know where the income column comes from.
How do I read a budget table in four steps?
Work in the same order every time.
- Add the income lines to get total income.
- Add every expenditure line, including savings if it sits in that column.
- Subtract: income minus expenditure gives a surplus (positive), a deficit (negative) or a balance of zero.
- Pick the items that explain the result, and quote their amounts.
Steps 1 to 3 are arithmetic. Step 4 is where the marks for economic judgement are usually earned.
Worked example: a fictional household
The Hamid household, an invented example, has this monthly budget.
| Income | RM | Expenditure | RM |
|---|---|---|---|
| Salary | 2 800 | Rent | 900 |
| Part-time work | 400 | Food | 800 |
| Transport | 350 | ||
| Utilities | 200 | ||
| Savings | 500 | ||
| Loan repayment | 300 | ||
| Entertainment | 250 |
Total income is 2 800 + 400 = RM3 200. Total expenditure is 900 + 800 + 350 + 200 + 500 + 300 + 250 = RM3 300.
Income minus expenditure is 3 200 − 3 300 = −RM100, so the budget has a deficit of RM100.
Food is 800 ÷ 3 200 × 100 = 25% of income. Rent is 900 ÷ 3 200, which is about 28% of income. Entertainment is the only clearly flexible item, at RM250.
What does a good answer look like?
A weak answer says: “The household should spend less and save more.” It is true of almost any household, so it earns little.
A stronger answer uses the table: “The household has a deficit of RM100 because spending of RM3 300 is above income of RM3 200. Entertainment of RM250 is the most flexible item. Cutting it by RM100 would balance the budget without touching rent, food or the loan.”
Notice the pattern: result, amount, cause, and a recommendation that names an item.
The mistake that costs marks
The common slip is to describe the table instead of judging it. “Rent is RM900, food is RM800” repeats what the table already shows.
The fix is to ask “so what?” after every figure. Rent is RM900, so it is the largest item at about 28% of income, which leaves little room to adjust the budget.
A second slip is ignoring the direction of the gap. Writing “the difference is RM100” without saying surplus or deficit loses the meaning.
Check yourself
Nadia’s fictional monthly budget has income of RM2 200 salary and RM300 tutoring. Expenditure is rent RM700, food RM650, transport RM300, bills RM180, savings RM250, phone RM120 and leisure RM200. Find the balance, food as a percentage of income, and one recommendation.
Answer
Total income = 2 200 + 300 = RM2 500.
Total expenditure = 700 + 650 + 300 + 180 + 250 + 120 + 200 = RM2 400.
Balance = 2 500 − 2 400 = a surplus of RM100.
Food = 650 ÷ 2 500 × 100 = 26% of income.
A sound recommendation: keep the surplus as extra savings, or use part of it to raise savings above RM250, because the budget already covers every fixed cost. The figures show room to do this without cutting food or rent.
What to study next
Test the whole cluster with the money, banking and income practice set. If your written judgements stay thin, read writing cause, mechanism and effect explanations, and record slips in the mistake log.
For a teacher to work through budget questions with you, see online one-to-one Economics tuition.