Enterprise: Strand 1 Analysing the Budget


Budgeting is an invaluable tool to help a household or an individual manage their money. While it is extremely useful, it must also be analysed.


We will analyse a budget deficit and a budget surplus.


Budget deficit A budget deficit means planned income is less than planned expenditure. What should the household do if there is a budget deficit?


1. Increase income: The members of the household could work extra hours (overtime) or get a second job. The household could also try to raise extra income by renting a room or selling off possessions.


2. Rearrange bill due dates: Arrange to pay off bill in installments, e.g. pay monthly instead of one lump sum.


3. Shop around: A good consumer always shops around. Getting quotes for household bills such as house insurance allows the consumer to find cheaper alternatives.


4. Borrow: The household could borrow money in order to avoid a deficit. This should be done with care and not over-relied on as repayments can be very expensive.


5. Seek money advice: Organisations such as Money Advice and Budgeting Service (MABS) give advice on money matters.


Budget surplus A budget surplus means planned income is greater than planned expenditure.


While this is a positive outcome for the household, it is important to manage a surplus correctly.


1. Save: The surplus could be saved in a financial institution such as a credit union, An Post or a bank and earn interest (see Unit 4).


2. Invest: The household could invest the surplus to earn more income (interest). This could be subject to DIRT (see Unit 6).


3. Increase discretionary spending: A household could buy necessities which they previously did without or go on a holiday.


In each scenario below, state if the figure (number) is a budget surplus or budget deficit, and explain one way the Write It! household could deal with the budget.


Amount Surplus or deficit? Recommendation (€100)


(€12,000) €2,000 €400


28 Research It!


Look up MABS to see what services they provide.


Examination Tip


• Make sure to state your recommendation, e.g. save money and then explain it.


• Do not repeat points.


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