1. Using the information given on the introduction page, complete column ‘B’ of the spreadsheet.

a. What was MT Pockets’ weekly take-home pay?

b. What was the total amount that MT spent per week?

2. Based on MT Pockets’ spending habits last year, how much would she have been able to save each week?

3. What was MT Pockets’ biggest expense for the year? Calculate the percentage of MT’s take-home pay that this represents. Give your answer to one decimal place.

4. In preparing her budget for the next twelve months, MT Pockets allows for increases in the cost of goods and services and assumes an ‘across the board’ increase of 2.5%. To complete the ‘Allocation per week’ column follow these steps:

· In cell E7, enter the formula =D7*1.025

· Click on cell E7 and hold the mouse button down.

· Drag the mouse pointer down until the cells E7 to E24 are highlighted.

· Go to the Edit menu and click on the Fill Down command.

[If you have opened this spreadsheet with Excel 2007, follow these steps:

· In cell E7, enter the formula =D7*1.025

· Click on cell E7 then drag the fill handle (in the bottom-right of the cell) down until the cells E7 to E24 are highlighted.]

What is the total weekly amount allocated for expenses in MT’s budget?

5. How much would MT Pockets be able to save each week? Calculate how many weeks it would take for MT to save for an overseas holiday costing $5000.

6. MT Pockets’ landlord informs her that the rent on her home will increase by 10%. Click on cell E7 and change the formula to account for this increase. What would be the overall effect of this increase on MT’s budget?

7. The ‘consumer price index’ is a measure of the average annual increase in the price of goods and services. Go to the Reserve Bank of Australia website www.rba.gov.au and investigate how an ‘across the board’ increase of 2.5% compares with the present rate of inflation. Why do many financial institutions recommend that when preparing a budget, you should calculate all of your expenses then add 10%?

8. By following the steps in question (4), change the spreadsheet so that the weekly allocation includes an ‘across the board’ increase of 10% for all expenses. What is the overall effect on MT Pockets’ budget?

9. Calculate what MT Pockets’ annual net salary would have to increase to for her budget to absorb the ‘across the board’ increase in expenditure described in question (8) without changing her spending habits.

10. Assuming that MT Pockets’ annual salary does not change, by how much would she have to decrease her weekly spending to absorb the increase described in question (8) and save $20 per week? Give an example of how MT might achieve this. Show your calculations.


1. a) $1115.38 b) $1066.59

2. MT would have been able to save $48.79 per week.

3. Rent ($295.00 per week). Rent represents of MT’s take-home pay.

4. Total weekly expenses = $1093.26

5. MT’s weekly savings would be $22.13. It would take MT 5000 ÷ 22.13 @ 226 weeks to save for her overseas holiday. (Of course, this assumes that MT does not invest her weekly savings in an account that earns her interest. In ‘Investing money’ we will investigate ways to maximise your savings).

6. The rental increase would result in a ‘balanced budget’ with zero savings. In other words, the total income would be equal to the total expenditure.

7. Accounting for an ‘across the board’ increase of 10% would be a safer strategy. Any unforseen expenses would be more easily absorbed by a safety net of 10%.

8. A 10% increase in expenditure would put MT Pockets’ budget ‘into the red’. In other words, her expenditure would exceed her income by $57.87 per week.

9. MT Pockets’ annual net salary would have to rise to a minimum of $58 000 + 52 x $57.87 = $61 009.24

10. MT Pockets would need to reduce her weekly spending by $77.87. This would require MT to assess her lifestyle and to decide what items she could reduce her spending on, or do without completely. She could achieve this by committing to a reduction in her ‘variable expenses’, such as: groceries; entertainment; lunches and minor expenses; clothes and other purchases; and gifts and donations. If MT was reluctant to sacrifice her lifestyle she could also ‘shop around’ for a cheaper deal on any or all of her ‘fixed expenses’, including such items as: mobile phone, pay TV and internet plans; insurance and health cover costs; and gym membership. A simple solution might be to reduce the amount of her superannuation contributions, though many people would believe that it makes good financial sense to keep-pace with the rate of inflation when considering how much to contribute to superannuation.