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© Take Charge Today – August 2013 – Income and Expense Statement Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona

RECOMMENDED GRADE

LEVELS AVERAGE TIME TO COMPLETE

EACH LESSON PLAN IS DESIGNED AND CONTINUALLY

EVALUATED “BY EDUCATORS, FOR EDUCATORS.” THANK YOU

TO THE FOLLOWING EDUCATORS FOR DEVELOPING

COMPONENTS OF THIS LESSON PLAN.

10‐12

Anticipatory Set & Facilitation: 50 minutes

Conclusion/Assessment Options: 15‐30 minutes

Time does not include optional items.

Kathie Beck, Family and Consumer Sciences Educator, Holland, Michigan

NATIONAL STANDARDS LESSON PLAN OBJECTIVES

The curriculum is aligned to the following national standards: National Standards for Financial Literacy American Association of Family and Consumer

Sciences Council for Economic Education National Business Education National Jump$tart Common Core English Language Arts

Upon completion of this lesson, participants will be able to: Evaluate the purpose of an Income and Expense

Statement Identify sources of income individuals have Explore typical expenses individuals incur Create an Income and Expense Statement

MATERIALS

MATERIALS PROVIDED IN THIS LESSON PLAN

MATERIALS SPECIFIC TO THIS LESSON PLAN BUT

AVAILABLE AS A SEPARATE DOWNLOAD MATERIALS TO ACQUIRE SEPARATELY

DEPENDING ON OPTIONS TAUGHT

Evan’s Income and Expense Statement 2.2.4.A1

Income and Expenses 2.2.4.A2

Claire’s Income and Expense Statement 2.2.4.A3

My Income and Expense Statement 2.2.4.A4

Income and Expense Statement Vocabulary List 2.2.4.E1

Income and Expense Statement Template 2.2.4.E2

Income and Expense Statement Information Sheet 2.2.4.F1

Income Cards 2.2.4.H1

Income and Expense Statement Note Taking Guide 2.2.4.L1

Income and Expense Statement Answer Key 2.2.4.C1

Income and Expense Statement Excel Template 2.2.4.E3

Income and Expense Statement PowerPoint Presentation 2.2.4.G1

Managing Your Money Unit Multiple Choice Test Bank and Answer Key 2.2.0.M1 & C1

Index cards

D‐rings

White boards, dry‐erase markers, and wipes

Computer and Internet access

INCOME AND EXPENSE STATEMENT Advanced Level

www.takechargetoday.arizona.edu

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RESOURCES EXTERNAL RESOURCES

External resources referenced in this lesson plan: The Cosby Show episode titled “Theo’s Holiday” in Season 2 Episode 22. Found on YouTube, Hulu, or various other

websites.

TAKE CHARGE TODAY RESOURCES

Similar lesson plan at a different level: None available

Optional lesson plan resources: Vocabulary Reinforcement Activities Active Learning

Tool 3.0.36

Four on the Floor Active Learning Tool 3.0.10

Financial Facts Feud Active Learning Tool 3.0.19

Tablet Applications for the Personal Finance Classroom Active Learning Tool 3.0.52

CONTENT EDUCATOR MATERIALS PARTICIPANT READING

Materials to support educators when preparing to teach this lesson plan are available on the Take Charge Today website.

Income and Expense Statement Information Sheet 2.2.4.F1

OPTIONAL INSTRUCTIONThis lesson is designed to be taught as a stand‐alone lesson. However, background content knowledge from the

following lesson plans is directly related to this lesson and may be helpful for participants.

Statement of Financial Position Lesson Plan 2.2.3 Spending Plans Lesson Plan 2.2.5 The Basics of Taxes Lesson Plan 2.2.2

LESSON FACILITATION

PREPARE Visual indicators to help prepare the lesson

INSTRUCTInstructions to conduct the lesson facilitation

CUSTOMIZE

Potential modifications to lesson facilitation

VOCABULARY ACTIVITY

Quiz Me Cards

Approximate time: 15 minutes prior to instruction and 15 minutes at the end Materials to prepare: Vocabulary Reinforcement Activities Active Learning Tool 3.0.36

o 10 Quiz Me Cards 3.0.36.H1 per participant Income and Expense Statement Vocabulary List 2.2.4.E1

Before instruction:

1. Go to the Vocabulary Reinforcement Activities 3.0.36 and reference the Quiz Me Cards Vocabulary Activity 3.0.36.J6.

2. Follow the directions and use the template provided to create Quiz Me Cards. Vocabulary is listed on the Income and Expense Statement Vocabulary List 2.2.4.E1

3. An example Quiz Me Card for a vocabulary term in this lesson is:

If time is limited, complete the Quiz Me Cards for a limited number of terms.

Have participants complete the quiz me cards during facilitation instead of using the note taking guide.

http://takechargetoday.arizona.edu/lessonplans/vocabulary-reinforcement-activities

http://takechargetoday.arizona.edu/lessonplans/four-floor

http://takechargetoday.arizona.edu/lessonplans/financial-facts-feud

http://takechargetoday.arizona.edu/lessonplans/tablet-applications-personal-finance-classroom

https://takechargetoday.arizona.edu/lessonplans/statement-financial-position

https://takechargetoday.arizona.edu/lessonplans/spending-plans

https://takechargetoday.arizona.edu/lessonplans/basics-taxes



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After instruction: 4. Complete the bottom half of the quiz me card (picture and sentence).

ANTICIPATORY SET

The Costs Add Up Approximate time: 5 minutes Materials to prepare for the anticipatory set: Income and Expense Statement PowerPoint Presentation 2.2.4.G1 1. Present the Income and Expense Statement PowerPoint Presentation 2.2.4.G1

a. Slide 2: The Costs Add Up i. Have participants estimate what each item would cost if it was

purchased every day for a month. ii. For each item show the average cost and the approximate cost

per month if purchased every day. iii. The approximate cost per year if the item is purchased every

day is also provided to reinforce discussion. iv. Discuss how small purchases can unknowingly become

expensive items if purchased frequently. This is why it is important to keep track of where money is spent.

RECOMMENDED FACILITATION

Approximate time: 45 minutes Materials to prepare for the facilitation: Print and cut apart Income Cards 2.2.4.H1 so there is 1 per participant. Some

will have a duplicate if there are more than 15 participants. 1 Income and Expense Statement Template 2.2.4.E2 per participant

o An electronic version Income and Expense Statement Excel Template 2.2.4.E3 is also available

Four on the Floor Active Learning Tool 3.0.10 o 1 Four on the Floor for Income and Expense Statement 3.0.10.H1 for

every 3‐5 participants Part 1: The Income and Expense Statement 1. Slide 3: The Income and Expense Statement

a. Distribute an Income and Expense Statement Template 2.2.4.E2 or E3 per participant.

2. Slide 4: Money Management Tools

Vocabulary Word

Graphic or Picture Sentence using the word

Definition in your own words

Income

I hope my income

increases as I get older.

Money received

Provide participants with white boards or another writing device and have them record their estimates for The Costs Add Up.

Have participants write down at least three things they have purchased in the past week and then estimate how much they spend on that item annually.

As each section of the Income and Expense Statement is discussed, have participants highlight their copy.

The Income and Expense Statement Note Taking Guide 2.2.4.L1 is provided but not included as part of the recommended facilitation instructions or approximate time.


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a. The Income and Expense Statement is the second money management tool.

b. Compare the Statement of Financial Position and the Income Expense Statement. The Income and Expense Statement tells you where your money came from and where it went.

i. For more information, refer to The Statement of Financial Position Lesson Plan 2.2.3.

3. Slide 5: How can an Income and Expense Statement help you manage money? a. An Income and Expense Statement is an important money management

tool. b. It will help you objectively evaluate past financial decisions. c. Evaluating past financial decisions helps you improve your financial

well‐being by setting goals, reducing money stress, and increasing net‐worth.

4. Slide 6: Three Components a. An Income and Expense Statement includes three sections: income,

expenses, and net gain or net loss.

Part 2: Income 5. Slide 7: What is Income?

a. Ask participants what income is and discuss the definition. 6. Slide 8: Income Categories

a. There are three income categories. Discuss the definition of each category.

b. Prepare the Income Cards 2.2.4.H1 by printing and cutting apart enough for one per participant.

i. 15 cards are available so cards will need to be duplicated if there are more than 15 participants.

c. Designate three areas of the room – one for each type of income. d. Provide each participant with one Income Cards 2.2.4.H1 e. Instruct participants to determine which of the three income categories

their card belongs and move the area of the room designated for that income category.

f. After everyone has classified their income card into a category, discuss the income types in each category and correct any mistakes.

7. Slide 9: Earned Income a. If needed, review the types of earned income. If participants did well

classifying their income into categories then skip to slide 14. 8. Slide 10: Gross Income vs. Net Income

a. Gross income is recorded on the Income and Expense Statement, because taxes and other deductions are listed as an expense in the expense category.

9. Slides 11‐12: Unearned Income a. Only savings and investments that were used to pay for expenses

during the time period of the Income and Expense Statement should be recorded in the income section.

b. Selling assets can be an important source of income and can be a better choice than using credit (because you avoid paying interest). But, it is important to understand that this action lowers your net worth and

To help explore income and expenses show all or part of The Cosby Show episode titled “Theo’s Holiday” in Season 2 Episode 22. In this episode Mr. and Mrs. Cosby turn their house into an apartment to teach Theo a lesson regarding real‐life money situations.

Rather than using the Income Cards 2.2.4.H1, read each example and have participants write a U=unearned, E=earned or G=government on a white board.

https://takechargetoday.arizona.edu/lessonplans/statement-financial-position

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asset sales are not a source of income that can be relied upon in the next time period.

10. Slide 13: Received Income from Government Programs a. If needed, review the types of income received from government

programs. b. Examples of government programs include worker’s compensation,

Social Security, unemployment benefits, and Medicaid. c. Have participants refer to the Income and Expense Statement and place

a checkmark next to income they have and would record on their Income and Expense Statement.

Part 3: Expenses 11. Slide 14: What are Expenses?

a. Ask participants what expenses are. Discuss the definition. 12. Slide 15: Expense Categories

b. Everyone’s expenses will be a little different based on values, but can be divided into the following categories: taxes, saving and investing, insurance, housing, transportation, food, and other.

13. Slide 16: Taxes a. Taxes include income, payroll, and property taxes paid. b. Most income and payroll taxes are deducted directly from a person’s

paycheck, so the information may be found on the paycheck stub. c. Property taxes are included within other categories since they are paid

on property owned, such as a house or motor vehicle. d. Sales and excise tax are not listed separately, because they are included

within the costs of other items listed on the Income and Expense Statement.

14. Slide 17: Saving and Investing a. Saving and investing includes any money saved or invested for future

use. Discuss the definition of savings. b. Invested money commonly includes money invested into a retirement

account. Some retirement accounts are sponsored by employers, so the amount invested is deducted directly from a person’s paycheck and can be found on a paycheck stub.

15. Slide 18: Why can savings and investments be both an income and expense? a. Point out that savings and investments are included in both the income

and expense section of the Income and Expense Statement. b. It may be income if money is taken from money saved or invested to

pay for expenses during that time period. c. It is an expense when you are adding money to savings or investments

to use in the future. 16. Slide 19: Insurance

a. Insurance is a product that transfers risk from an individual to an insurance company or organization.

b. Insurance helps pay for large unexpected financial losses. c. There are many types of insurance, but the most common are health,

property and liability (purchased to cover losses related to home and automobile), life, and disability.

17. Slide 20: Four on the Floor

For more information about taxes, teach The Basics of Taxes Lesson Plan 2.2.2.

https://takechargetoday.arizona.edu/lessonplans/basics-taxes

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a. Conduct the Four on the Floor activity by following the instructions and using the materials provided in the Four on the Floor Active Learning Tool 3.0.10.

i. Four on the Floor is an activity that encourages collaborative brainstorming and question answering in an engaging manner. Multiple sheets of paper with four questions are tossed around the room. If a participant receives a “Four on the Floor” paper they must answer a question by adding a response that has not been previously recorded.

18. Slide 21: What expenses were recorded in the housing category? a. Spread the completed Four on the Floor papers to various participants

around the room. b. Ask participants holding the Four on the Floor papers what expenses

were recorded in the housing category. c. Use the expenses on the slide to add to the list.

19. Slide 22: What expenses were recorded in the transportation category? a. Have participants pass the Four on the Floor papers to some else and

ask those participants to share what expenses were recorded in the transportation category.

b. Use the expenses on the slide to add to the list. 20. Slides 23‐25: What expenses were recorded in the food and other category?

a. Repeat the process for the remaining expense slides. 21. Slide 26: Make the Income and Expense Statement your own!

a. There is not a specific list of categories to be used in the expense section of an Income and Expense Statement as long as all expenses are recorded.

b. The more specific the categories, the greater chance of including all expenses.

c. Have participants refer to the Income and Expense Statement in front of them and place a checkmark next to the expenses that they have and would record on their Income and Expense Statement.

22. Slide 27: Find a tracking method that works for you a. Use any method that works for you to track income and expenses.

Discuss the options provided. b. A written system works better than a purely mental system. Individuals

often think they earn more than they do and spend less than they actually do.

23. Slide 28: Net Gain or Net Loss a. Once all income and expenses have been recorded, subtract expenses

from income to determine if there is a net gain or loss b. If the number is positive, you have a net gain which is what you want to

have. This means you are making more than you are spending. i. Your goal is to have a net gain without having drawn down

savings or selling assets. If savings or assets were used, you end with a net gain but have reduced your net worth.

c. If the number is negative, you have a net loss which means you are spending more than you are making.

24. Slide 29: Net Gain or Net Loss a. If you have a net gain you have flexibility for unanticipated expenses

Refer to the Tablet Applications for the Personal Finance Classroom 3.0.52 resource for specific tracking applications for smartphones and tablets.


http://takechargetoday.arizona.edu/lessonplans/tablet-applications-personal-finance-classroom

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and can use that money for savings or other expenses. b. A net loss will make it challenging to increase net worth and therefore

become more financially secure. If you have a net loss, you will have to increase income, decrease expenses, or do a combination of both.

a. A spending plan is the next of the three money management tools to plan spending in order to have a net gain.

25. Slide 30: Summary Optional: Part 4: Help Evan Create an Income and Expense Statement 26. Slide 31: Meet Evan

a. Introduce Evan. Explain that he doesn’t have enough money to pay all of his expenses every month.

27. Slide 32: How does Evan think he is spending his money? a. Explain that Evan thinks that his expenses after saving totals no more

than $1,000 per month, but $1,000 isn’t covering all of his expenses every month.

28. Slide 33: Are you sure there isn’t anything else you spend your money on, Evan? a. Evan realizes that he also buys a daily coffee and weekly lunch. b. Even little expenses can add up quickly. His coffee and lunches total $62

per month, which was money he wasn’t including in his estimates. 29. Slide 34: Help Evan Create an Income and Expense Statement

a. Explain to participants that they will use the Income and Expense Template to create a statement for Evan.

i. Use the Income and Expense Statement Template 2.2.4.E2 or E3 referenced during facilitation.

b. Have participants record the information from Evan’s paycheck stub on their Income and Expense Statement Template.

30. Slides 35‐36: Evan Expenses a. Record Evan’s expenses on the Income and Expense Statement

Template. 31. Slide 37: Evan’s Income and Expense Statement

a. After everyone has completed Evan’s Income and Expense Statement, have them customize his Income and Expenses Statement by removing the categories and sub‐categories that he doesn’t need. If the paper template is being used, participants may simply cross out the categories.

b. Show Evan’s Income and Expense Statement on the slide and make sure all participants recorded the right information and have a net loss of ‐$57.42.

c. Evan’s complete Income and Expense Statement is included on slide 37. d. Discuss any errors that were made when completing the Evan’s Income

and Expense Statement. 32. Slides 38‐39: Discussion

a. According to Evan’s Income and Expense Statement, he has a net loss. What could he do to change his net loss to a net gain?

i. There are two options for increasing net loss to net gain: increase income, decrease expenses, or both. Evan will have to do this. He can use a spending plan to help him determine what changes to make the next month.

The Evan’s Income and Expense Statement 2.2.4.A1 is also available and includes all information that is in the PowerPoint. Therefore, this scenario may be facilitated with the PowerPoint, worksheet, or a combination of both.

Have participants work in small groups to compare their completed Income and Expenses Statements to ensure information is correct. An Income and Expense Statement Answer Key 2.2.4.C1 is available.

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b. Were Evan’s mental calculations accurate? i. The expenses that are the same every month such as rent and

car insurance were accurate, but many of the other expenses including entertainment, personal care, and groceries were not accurate. He was also missing expenses such as coffee and lunches at restaurants.

c. What does this say regarding only thinking about your finances versus writing the information down?

i. It is easy to underestimate or forget smaller expenses if they are not written down.

d. How has creating an Income and Expense Statement helped Evan manage his money?

i. By creating an Income and Expense Statement, Evan has a much more accurate sense of his expenses. He now realizes why he is short on cash every month. He can now use his Income and Expense Statement to create a net gain instead of net loss.

CONCLUSION OPTIONS There are three conclusion options provided for this lesson. Option 1: Quiz Me Cards Option 2: Reinforcement Worksheet Option 3: Financial Facts Feud

Option 1: Quiz Me Cards Approximate time: 15 minutes Materials to prepare: Vocabulary Reinforcement Activities Active Learning Tool 3.0.36

o 10 Quiz Me Cards 3.0.36.H1 per participant Income and Expense Statement Vocabulary List 2.2.4.E1 If Quiz Me Cards were completed at the beginning of the lesson, have participants complete the cards with a graphic or picture and write a sentence using the word.

Option 2: Reinforcement Worksheet Approximate time: 20 minutes Materials to prepare: 1 Income and Expense 2.2.4.A2 per participant 1. Complete the Income and Expense 2.2.4.A2 worksheet as directed.

Option 3: Financial Facts Feud Approximate time: 30 minutes Materials to prepare: Financial Facts Feud Active Learning Tool 3.0.19.

o Feud Questions for Income and Expense Statement Lesson Plan 3.0.19.K2

o Financial Facts Feud PowerPoint for Income and Expense Statement Lesson Plan 3.0.19.G3.

2 Tap lights or buzzers at the front of the room set up for a face‐off

For additional vocabulary reinforcement, have participants gather signatures from adults on the back of the card when they use the word in daily conversation.



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1. Conduct the Financial Facts Feud activity. This activity is similar to the television

game show Family Feud©. Instructions and questions for this activity are included in the Financial Facts Feud Active Learning Tool 3.0.19.

ASSESSMENT OPTIONS There are two assessment options provided for this lesson. Option 1: Claire’s Income and Expense Statement Option 2: My Income and Expense Statement

Option 1: Claire’s Income and Expense Statement Approximate time: 30 minutes Materials to prepare: 1 Claire’s Income and Expense Statement 2.2.4.A3 per participant 1 Income and Expense Statement Template 2.2.4.E2 per participant

o An electronic version Income and Expense Statement Excel Template 2.2.4.E3 is also available

1. Using Claire’s Income and Expense Statement 2.2.4.A3, participants create a

statement based on a scenario and answer reflection questions. a. Two templates are provided to create the Income and Expense

Statement: Income and Expense Statement Template 2.2.4.E2 to complete by hand, and a Microsoft Excel template Income and Expense Statement Excel Template 2.2.4.E3 to create electronically.

Option 2: My Income and Expense Statement Approximate time: 30 minutes class time plus time outside of class to complete tracking Materials to prepare: 1 My Income and Expense Statement 2.2.4.A4 per participant 1 Income and Expense Statement Template 2.2.4.E2 or Expense Statement

Excel Template 2.2.4.E3 per participant 1. Complete My Income and Expense Statement 2.2.4.A4. Have participants track

their income and expenses, create a personal Income and Expense Statement, and answer reflection questions.

a. Modify the time period of the Income and Expense Statement to work for your classroom and schedule. A minimum of one week is recommended.

b. If this assessment is completed, participants may use their Income and Expense Statement to complete a spending plan in the Spending Plan Lesson Plan 2.2.5.


https://takechargetoday.arizona.edu/lessonplans/spending-plans

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Income and Expense Statement Vocabulary List

TERM DEFINITION

1 Expense Money spent

2 Gross income An individual’s income earned as salary or wages before taxes and other deductions

3 Income Money received

4 Income and Expense Statement

Lists and summarizes income and expense transactions that have taken place over a specific period of time, usually a month or year

5 Insurance A product that transfers risk from an individual to an insurance company or organization

6 Mortgage A payment, usually monthly, applied to the balance of a home loan used when purchasing housing

7 Net gain When income is greater than expenses

8 Net income Take home pay

9 Net loss When expenses are greater than income

10 Savings The portion of current income not spent on consumption

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Income and Expense Statement Note Taking Guide Total Points Earned

Name

Total Points Possible

Date

Percentage

Class

Directions: Use the prompts provided to help you take notes during the lesson.

Income and Expense Statement for:

Time Period:

Amount

Income

Earned Income

Wages or salary before deductions

Unearned Income

Interest earned this time period

Money from savings and investments to help pay expenses during this time period

Received Income from Government Programs

Total Income $

Expenses

Deductions Often Taken from Paychecks

Contributions to retirement programs (401k,

403b, pension, IRA)

Federal Income Tax and State Income Tax

Social Security and Medicare

Saving and Investing (Pay Yourself First)

Contribution to savings and investments

Insurance Premiums

Health, automobile, home or renters, life

Housing Costs

Transportation Costs

Food Costs

Family Member Care

Communication and Computers

Telephone landline, cell phone, Internet,

cable/satellite television

Medical Costs Not Covered by Insurance

Clothing and Personal Care

Educational Expenses

Pet Care

Entertainment

Gifts and Charitable Contributions

Credit Costs

Student loan, credit card, other loan payments

Total Expenses $

Net Gain or Net Loss (Income less Expenses) $

What is an Income and Expense Statement?

Income Circle where income is located on the Income and Expense

Statement. What is income?

Place a star next to the three categories of income on the

Income and Expense Statement.

What is one example of earned income?

What is gross income?

What is net income?

Is gross income or net income recorded in the income

section of the Income and Expense Statement?

What is one example of unearned income?

What is one example of received income from government

programs?

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ExpensesCircle where expenses are located on the Income and Expense Statement. What are expenses?

What taxes are recorded on the Income and Expense Statement?

What is savings?

What is insurance? What are two types of insurance?

What are two examples of expenses in the housing category?

What are two examples of expenses in the transportation category?

What are two examples of expenses in the food category?

What are two examples of expenses in the other category?

Net Gain/LossCircle where net gain/net loss is located on the Income and Expense Statement. How is a net gain/loss calculated?

Tracking Income and ExpensesExplain two different ways that income and expenses may be tracked?

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Income and Expense Statement Template Total Points Earned

Name

Total Points Possible

Date

Percentage

Class

Income and Expense Statement for:

Time Period:

Amount

Income

Earned Income


Commissions/tips/bonuses

Tax refunds

Unearned Income

Interest earned this time period

Investment earnings earned this time period

Sales of assets

Money from savings and investments to help pay expenses during this time period

Scholarships/grants from non‐government sources

Money from others

Child support

Other

Received Income from Government Programs

Scholarships/grants from government sources

Government programs

Total Income $

Expenses

Deductions Often Taken from Paychecks

Contribution to a retirement program (401k, 403b, pension)

Individual retirement account contribution (IRA)

Federal Income Tax

State Income Tax

Social Security

Medicare

Saving and Investing (Pay Yourself First)

Contribution to savings and investments

Insurance Premiums

Health insurance, Medicaid and Medicare

Renters or homeowners insurance

Automobile insurance

Disability insurance

Life insurance

Housing Costs

Property taxes (if house or condo is owned)

Housing payment (rent or mortgage)

Utilities (gas, electricity, water, garbage)

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Household furnishings

Household maintenance and repairs

Transportation Costs

Automobile payment

Fuel (gasoline/diesel)

Automobile repairs and maintenance

Public transportation fees

Automobile license and registration (yearly fee)

Food Costs

Food at the grocery store

Meals at restaurants

Snacks away from home (coffees, treats)

Non‐food kitchen supplies (plastic wrap, dish soap)

Family Member Care

Child care or other dependent care

Personal allowances

Communication and Computers

Telephone land line

Cell phone

Internet

Cable/satellite television

Computer related expenses

Medical Costs Not Covered by Insurance

Medical care

Dental care

Eye care (check‐ups, glasses, contact lenses)

Medications – prescription, over‐the‐counter

Clothing and Personal Care

Clothing

Personal care (shampoo, haircuts, cosmetics, laundry, etc.)

Educational Expenses

Tuition for private school or higher education

Private lessons

Sports and organization fees

Educational supplies (books, news)

Pet Care

Pet food

Pet supplies (toys, medicine)

Veterinary services

Pet care (pet walking, overnight stays, grooming)

Entertainment

Movies, books, and other entertainment

Vacations

Other

Gifts and Charitable Contributions

Gifts to others and charitable contributions to organizations

Credit Costs

Student loan payment

Credit card payment

Other:

Total Expenses $

Net Gain or Net Loss (Income less Expenses) $

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Income Cards


Commissions

Tips Bonuses

Tax refunds Interest earned

Investment earnings Sales of assets

Money from savings Money from investments

2.2.4.H1 2.2.4.H1

2.2.4.H1 2.2.4.H1

2.2.4.H1 2.2.4.H1

2.2.4.H1 2.2.4.H1

2.2.4.H1 2.2.4.H1

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Scholarships/grants from non‐government sources

Money from others

Child support Scholarships/grants from government sources

Government programs such as Social Security and worker’s compensation

2.2.4.H1 2.2.4.H1

2.2.4.H1 2.2.4.H1

2.2.4.H1

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Evan’s Income and Expense Statement Total Points Earned

Name

16 Total Points Possible

Date

Percentage

Class

Step One:

Use the information below and the template provided to create an Income and Expense Statement for Evan for the month of March. (10 points for completion)

Evan summarized the information from his March paycheck in the table to the right. This is his only form of income.

Gross Income $1600.00

Federal Income Tax $200.00

Social Security $99.20

Medicare $23.20

Net Income $1277.60

Evan used an app on his smartphone to track his expenses for the month. The information from his smartphone is summarized in the table below. Categorize each expense.

Date Expense Category

3/1 Automatic transfer to savings account $255.52

3/1 $400 check for rent payment

3/1 Health insurance $100

3/2 Withdrew $20 in cash to purchase daily coffee

3/3 Lunch $6.50

3/3 Hockey game admission ‐ $10

3/5 Purchased gas for $40

3/6 Movie theater ticket $7.50

3/7 Groceries $52

3/10 Lunch $8

3/12 Basketball game admission $15

3/15 Cell phone payment $70

3/15 Car insurance payment $40

3/15 Renter’s insurance payment $10

3/16 Haircut $15


3/20 Lunch $7.50

3/25 Bowling with friends $15

3/27 Groceries $38

3/27 Concert ticket ‐ $45


3/31 Electricity payment $50

3/31 Water payment $50

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Step Two:

Customize Evan’s Income and Expense Statement by removing the categories and sub‐categories that you believe he would not need. (2 points for completion)

Step Three:

Use Evan’s Income and Expense Statement to answer the questions below. 1. According to Evan’s Income and Expense Statement, he has a net loss. What could he do to change

his net loss to a net gain? (1 point)

2. Why do you think Evan’s mental calculations were not accurate? (1 point)

3. Using your answer to question 2, what does this say about thinking about your finances versus writing the information down? (1 point)

4. How has creating an Income and Expense Statement helped Evan manage his money? (1 point)

Page | 19 2.2.4.A2


Income and Expenses Total Points Earned

Name


Date

Percentage

Class

Directions: Help Rory create his Income and Expense Statement by answering his questions below. Make

sure to provide an explanation to each answer to help Rory learn more about the Income and Expense

Statement.

1. According to Rory’s paycheck, he earned $800 last month, but before taxes and other deductions were

taken out he earned $1,050. Which amount should be recorded as income in his Income and Expense

Statement? (2 points)

2. Rory is surprised to learn that there are many other types of income besides the wages he earns in this

paycheck every month. Describe at least three other types of income that may be included on an Income

and Expense Statement to help Rory identify if he has any other types of income that need to be

recorded. (3 points)

3. Now that Rory understands how comprehensive income is, he is wondering if he needs to record the

$500 scholarship he was awarded from his local community to help pay his college tuition. If so, in which

category of income should it be recorded: earned income, unearned income, or received income from

government programs? (2 points)

4. Rory makes it a habit to save $80 every month before using his paycheck to purchase anything else. He

isn’t sure if his savings should be recorded as an income or an expense on his Income and Expense

Statement. Should his $80 deposit to his savings account be recorded as an income or an expense? (2 points)

Page | 20 2.2.4.A2


5. Rory understands that taxes are one of his largest expenses. However, he doesn’t understand why

expenses doesn’t include a “taxes” specific category. Explain to Rory where taxes are recorded on the

Income and Expense Statement. (3 points)

Directions: Answer the following questions with complete sentences.

6. How does an Income and Expense Statement differ from a Statement of Financial Position? Identify at

least one difference. (2 points)

7. Give two examples of expenses that may be included in each of the following categories: (5 points)

Insurance 1.

2.

Housing 1.

2.

Transportation 1.

2.

Food 1.

2.

Other 1.

2.

8. Describe a method of tracking income and expenses that you would use; justify your choice by giving

examples of how the method would fit your lifestyle. (2 points)

9. Why is it important to have some type of written system for tracking income and expenses? (1 point)

10. Once a person determines whether they have a net gain or net loss, what would be the next step in

financial planning that would help make changes to the Income and Expense Statement? (1 point)

Page | 21 2.2.4.A3


Claire’s Income and Expense Statement

Total Points Earned

Name


Date

Percentage

Class

Claire is applying for a loan to purchase a pre‐owned car. She is told that the monthly payment for the loan would be $200. She wants to make sure that she can afford this monthly loan payment, so she is creating an Income and Expense Statement to summarize her financial transactions for a month. Claire saved her paycheck stub and all receipts for the month of August and summarized the information below. Use this information to help Claire create an Income and Expense Statement for the month. Claire was lucky to land her dream job several years ago. She is paid $4,000.00 per month before deductions. Her August paycheck stub indicated that she pays $800.00 in Federal Income Taxes, $230.64 in Social Security and $53.94 in Medicare taxes. As part of her job she receives benefits including an employer sponsored retirement account which she pays $280.00 into every month. She appreciates that this is automatically deducted from her paycheck. To ensure she is prepared for retirement, she also saves $50.00 per month in a personal retirement account. As part of her job she also receives excellent health insurance, a benefit for which she only pays $120.00 per month. Even though her health insurance covers the majority of her medical expenses she still has to pay a small percentage of the out‐of‐pocket costs, so she budgets $75.00 per month. Claire understands the importance of saving money for future use and emergencies so she diligently saves $400.00 per month by having the money automatically transferred to her savings account. After saving for a down payment, last year Claire was able to reach her goal of home ownership and she purchased a small house. She pays $800.00 per month towards her mortgage which also includes her property taxes. Other costs of owning her home include $150.00 for all utilities and $50.00 for homeowner’s insurance. Her house was only a couple years old when she purchased it so maintenance costs are low. She tracked about $50.00 per month in various household maintenance and cleaning expenses. Claire owns a car that is fully paid for. She spent $100.00 on gas in August as well as $50.00 on repairs and maintenance. She pays $50.00 per month for automobile insurance and budgets $20.00 per month to pay her yearly license and registration fee. Even though Claire owns a car that runs well she feels like she is doing well financially and would like to upgrade to a newer car with fewer miles. Claire enjoys dining out, so she spends $150.00 per month at restaurants as well as $120.00 on groceries and $20.00 on other kitchen supplies like dishwasher detergent. Claire owns a cell phone that costs her $60.00 per month. She spends $30.00 per month on clothing and $50.00 per month on personal care, such as hair‐cuts and make‐up. Claire enjoys reading and owns an e‐reader and allows herself to purchase $15.00 per month in e‐books. Claire also spends $75.00 per month on other forms of entertainment such as renting movies and spending time with friends.

Using the template provided, complete Claire’s Income and Expense Statement. (10 points for completion)

Page | 22 2.2.4.A3


When the statement is complete, analyze the statement to answer the questions below.

1. Does Claire have a net gain or a net loss? What amount? (2 points)

2. After examining her Income and Expense Statement, if you were Claire’s financial advisor, what is one change you would recommend Claire make to her financial decisions? Explain. (2 points)

3. Do you think Claire missed any expenses that should be recorded on her Income and Expense Statement in the future? (2 points)

4. From the information in her Income and Expense Statement, would you recommend that Claire purchase the new car and begin making the monthly loan payment of $200.00? Provide at least two reasons to support your answer. (3 points)

5. What other information would help Claire make a decision regarding whether or not to purchase a new car? (1 point)

Page | 23 2.2.4.A4


My Income and Expense Statement

Total Points Earned

Name


Date

Percentage

Class

Step One:

Determine a tracking method that will work best for you. Track all of your income and expenses for the period of time designated by your instructor. (5 points for completion)

Step Two:

Using the template provided, create an Income and Expense Statement for yourself for the week your

tracking was completed. (10 points for completion)

Step Three:

When your Income and Expense Statement is complete, analyze the statement to answer the questions

below.

1. What tracking method did you use? Would you use this method again or try a different method? Explain. (2 points)

2. Do you have a net gain or a net loss? What amount? (2 points)

3. If you have a net loss, what can you do to change that net loss to a net gain? If you have a net gain, what could you do with this money? (2 points)

Page | 24 2.2.4.A4


4. Were you surprised by the numbers on your Income and Expense Statement? Explain. (2 points) 5. Now that you see a comprehensive view of your income and expenses, what is one change you would

like to make to your financial decisions? Write a SMART goal to make this change. (5 points) 6. How can creating an Income and Expense Statement help you manage your money? Identify at least one

specific way. (2 points) 7. How do you anticipate your Income and Expense Statement changing in the next five years? Identify at

least two specific ways. (2 points)

2.2.4.F1

© Take Charge Today – August 2013 – Income and Expense Statement – Page 1 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Ins tute at The University of Arizona

Income and Expense Statement Advanced Level

Do you know where your money is coming from and where it is going? An Income and Expense Statement is an

important financial management tool that summarizes your past transac ons to determine how you are

earning and spending your money. It helps you objec vely evaluate your past financial decisions.

The Income and Expense Statement lists and summarizes income and

expense transac ons that have taken place over a specific period of

me, usually a month or year. Whereas a statement of financial posi on

documents your present financial posi on and net worth, an Income and

Expense Statement documents your past financial transac ons; it tells

you where your money came from and where it went. Reviewing your

Income and Expense Statement can help you establish financial goals,

increase your net worth, lead to the reduc on in money stress and improve your financial well‐being.

Components of the Income and Expense Statement are described below.

Income

Income is money received. In addi on to compensa on for work, there are several other types of income.

Income is divided into three categories: earned, unearned and received from government programs.

Earned income

Earned income is any money earned from work, such as:

Wages or salary ‐ Gross Income is an individual’s

income earned as salary or wages before taxes and

other deduc ons. It is important to record your gross

income and not your net income (take home pay) in

the income sec on of your Income and Expense

Statement. Taxes and other deduc ons from your

paycheck will be listed as expenses in the expense sec on of your Income and Expense Statement. Net

Income is what is le in your paycheck a er taxes and other deduc ons. Net income is o en referred to

as “take home pay.”

Commissions/ ps/bonuses – A commission is income earned upon a sale and is o en calculated as a

percentage of the purchase price. It is some mes paid in addi on to a wage or a salary. Realtors receive a

commission once the sale of property is complete between two par es. Sales associates at some stores

receive a commission on items purchased by customers who they have assisted. Tips are sums of money

given to someone as a way of rewarding them for quality service. Tips are commonly earned by those in

customer service fields such as restaurant servers, hair stylists, and taxi drivers. A bonus is an amount of

money added to wages on a seasonal basis as a reward for good performance. This sum of money is paid

in addi on to the employee’s wage or salary. Tax refunds – Tax refunds received from your state and federal government are considered earned

income, because they reflect over‐withholding from your paycheck in a prior period.

Net Income

Statement of Financial Posi on

Income & Expense Statement

Spending Plan

What is my financial posi on

today?

How have I managed my

money in the past?

What is my future money

management plan?

2.2.4.F1


Income, con nued

Unearned Income Unearned income is income received from sources other than employment such as: Interest earned ‐ Any interest from depository ins tu on accounts earned

during the me period of the Income and Expense Statement. Investment earnings – Any money earned from financial investments during

the me period of the Income and Expense Statement. Money from savings and investments – Any money withdrawn from savings or

received from sale of a financial investment and used to pay for expenses during the me period on your Income and Expense Statement

Sales of assets – The amount of money earned from the sale of an asset such as a car, jewelry, a home, or a business you own. Selling an asset can be an important source of income to cover expenses, especially unexpected expenses. But, it is important to understand that this ac on lowers your net worth (the monetary value of everything you own, minus your debt). And, like tapping your savings to cover expenses, asset sales are not a source of income that you can rely upon in the next me period, because once you’ve sold an asset it is gone. For example, if you use some of your savings to throw a party, you have a smaller savings balance available next month to cover emergencies or any other spending. Only you can judge whether the party was “worth it,” but you will definitely have fewer assets to start the next month. If you sell your car to pay for tui on at your community college, (invest in yourself) you may be temporarily poorer, but the decision can eventually pay off in terms of higher earning poten al. A decision to sell assets to pay for current spending requires careful thought. But, if you face a me period in which your expenses are going to exceed the rest of your income, selling assets (or tapping savings) can be a be er choice than using credit, because you avoid paying interest on a loan.

Scholarships/grants – Money received from scholarships and grants from non‐government sources to help pay for educa on.

Money from others – Any money received from others, such as friends and family.

Child support – Child support is court‐ordered money paid for the care of one's minor child.

Received Income from Government Programs There are many different government programs that offer a form of temporary income for people who qualify. Examples of federally funded government programs include Workers’ Compensa on, Social Security, and Unemployment Benefits. Any scholarships and grants provided by the government should also be included in this sec on of income.

What forms of income do you

have?

Expenses

An expense is money spent. All expenses are divided into the following categories: taxes, saving and inves ng, insurance, housing, transporta on, food, and other.

Taxes: Taxes include income, payroll, and property taxes. Income and payroll taxes are deducted directly from your paycheck. Refer to your paycheck stub to find out the amount you pay. Property taxes, such as those on houses and vehicles are usually charged annually by state or local governments and are billed directly to the owner. These taxes are reflected on the Income and Expense Statement within the expense category to which they apply, such as housing or transporta on. Sales and excise taxes are usually added to the price of an item purchased and charged at the point of sale, so they are reflected on the Income and Expense Statement within the costs of specific items purchased.

2.2.4.F1


Expenses, con nued

Food

Purchases from a store that include food

and some household items (cleaning

materials and other consumable goods,)

fall into the “food” category. Be sure to

include all meals and drinks purchased

away from your home as expenses in this

category.

Saving and Inves ng

The Saving and Inves ng category of

expenses includes any por on of

current income that is saved and/or

invested for future use. This money

may be placed in a savings account

at a depository ins tu on, or it may

be invested in financial assets such

as stocks and bonds. O en these

investments are made through a

re rement account. Some

employers sponsor re rement

accounts for workers and deduct the

employee’s contribu on to the

account directly from a person’s

paycheck. The amount can be found

on a paycheck stub (just like income

and payroll taxes).

Insurance

Insurance is a product

that transfers risk from

an individual to an

insurance company or

organiza on.

Insurance helps pay

for large unexpected

financial losses. There

are many types of

insurance, but the

most common are

health, life and

disability and property

and liability

(purchased to cover

losses related to home

and automobile).

Housing

There are many expenses associated with

housing. Perhaps the largest housing

expense is the monthly payment made to

pay your rent or mortgage. A mortgage

payment is applied to the balance of the

home loan used when purchasing

housing. In addi on to the monthly

payment, u li es such as your electric,

water, and garbage service bills must be

paid. In some situa ons your u li es are

included in your monthly rent. Property

taxes (paid only by those owning

property), maintenance costs, and

household furnishings (furniture,

appliances, etc) are other costs

associated with housing. Homeowner

and renter’s insurance is another housing

‐ related cost.

Transporta on

There are two primary types of transporta on that people rely

upon: public transporta on and a personal automobile. If you

rely on public transporta on, your expenses may include taxi,

bus, or subway fares. If you own your own car you may have a

monthly loan payment. Other expenses associated with a

personal automobile include fuel, license and registra on (due

annually), repairs and maintenance, and insurance (which is

included in the Insurance sec on).

What are five expenses you currently have?

2.2.4.F1


A wri en system is more accurate than a mental system when tracking your income and expenses. We can

easily trick ourselves into thinking we earn more and spend less than we actually do. Tracking our income

and expenses can be overwhelming so it is important to find a system that works well for you. Consider some

of these op ons for tracking your income and expenses:

Record in wri ng ‐ If you are crea ng an Income and Expense Statement for a short period of me (such

as a month) to get an idea of how much you typically spend, you may be able to carry a small notebook

and write down each source of income and expense as it occurs.

Smartphone ‐ If you own a smartphone, you can use the notepad feature or another applica on to

record income and expenses. Inves gate the numerous free or paid apps that are available to help you

do this.

Other

Other expenses incurred by people may include:

Family member care: Expenses paid for the care of children (daycare

costs) or elderly parents.

Communica on and computers: This includes your internet, cell

phone, and tablet monthly service plans, plus any communica on

device purchases and computer‐related purchases and maintenance

costs.

Medical costs: Any out‐of‐pocket costs not covered by insurance

including monthly prescrip ons or over‐the‐counter medica ons.

Clothing and personal care: This category includes clothing purchases,

laundromat charges and personal care expenses including shampoo,

toothpaste, haircuts, and cosme cs, etc.

Educa onal expenses: Includes tui on payments, costs associated

with private lessons or tutoring, supplies (paper, books, pens, etc.) and

dues to professional organiza ons

Pet care: Expenses include pet food, veterinary costs and medicine,

toys, grooming, and boarding.

Entertainment: Entertainment varies from person to person, but

includes cable or satellite television, movies, music and the device on

which it is played, and vaca ons just to name a few.

Gi s and charitable contribu ons: Dona ons to a charitable cause or

gi s to family members.

Credit costs not included elsewhere: These expenses may include

credit card payments or other payments toward liabili es not included

in other expense categories.

Expenses, con nued

You have values, needs and

wants that are different than

others and help determine

which expense categories are

included in your Income and

Expense Statement. This

statement should be

customized to reflect you. The

more specific you make your

categories, the greater your

chance of including all of your

expenses.

Tracking Income and Expenses

What is one expense that

you could reduce or

eliminate today?

2.2.4.F1


Once you have tracked and recorded all of your income and

expenses for the me period desired, you can easily subtract

your expenses from your income. Your goal should be to

have income (from all sources other than drawing down

savings or selling assets) greater than expenses. This would

create a net gain. This means you are making more than you

are spending and therefore you are living within your means.

A net gain also allows you the added advantage of some

flexibility in paying unan cipated expenses. Think about

using your net gain to increase your savings or investments.

If your expenses are greater than income, you have a net

loss and are spending more than you are earning. For many,

the money used to cover the gap in income would most

likely come from borrowing (credit). A consistent net loss

across many me periods will make it challenging to increase

your net worth. Take another close look at your spending

habits and obliga ons, as well as your earnings. Maybe there

are changes you could make to decrease the possibility of a

monthly net loss. Can you decrease your spending or

increase your income? Developing a personal spending plan

(or budget) is another financial tool that will help you plan

your spending.

Net Gain or Net Loss

Expenses Net Gain or Loss Income

Keep receipts ‐ To track expenses, keep all of your receipts for a specific period of me. Some apps actually

let you scan receipts and will categorize them according to the type of expense.

Depository ins tu on account statements ‐ If you use online banking with your depository ins tu on then

most likely your banking website will include a record of your account statements. If you don’t have access

to online banking make sure you file away your monthly (hard copy) statements.

Money management computer so ware program ‐ If you use a money management computer program, it

will create an Income and Expense Statement for you as long as you are diligent about entering your

financial informa on.

Tracking Income and Expenses, con nued

What method of tracking income and expenses would work best for you? Why?

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