Unit of competency details

Elements and Performance Criteria 

Element 

Performance Criteria 

1

Analyse and discuss budgeting as a financial tool

1.1

The role of budgeting in the lives of different groups  is discussed

1.2

The importance of budgeting appropriately to meet expenses is analysed and discussed and related to different stages of life 

1.3

The importance of setting financial goals  is analysed and discussed in consultation with others

1.4

Obstacles  that might prevent financial goals being achieved are analysed and discussed

1.5

The types of behaviours and skills  required for successful budgeting are explored and analysed

2

Prepare to develop a personal budget 

2.1

All income and expenses for a short period of time are recorded to assist in estimating expenditure requirements

2.2

A spreadsheet  for recording all budget information is obtained or developed and established to record income and expenditure for a relevant period of time

2.3

All sources of income  for the specified period are identified and listed using the budget spreadsheet

2.4

All regular and fixed expenses  for the specified period are identified and listed using the budget spreadsheet

2.5

All variable expenses  for the specified period are identified and listed using the budget spreadsheet

3

Develop a personal budget

3.1

Total expenses recorded are subtracted from the total income to determine a surplus or deficit budget for the specified period

3.2

Reasons for a deficit budget are explored and ways to reduce expenses or increase income  are investigated

3.3

Allocation of surplus funds towards saving and meeting identified financial goals is explored

4

Implement and monitor the personal budget

4.1

The budget is followed according to plan for a period of time

4.2

Actual expenses and income for the period during which the budget is implemented are recorded and compared to budgeted expenses and income

4.3

Any differences in budgeted and actual amounts are looked at and the budget modified where necessary

4.4

Handy hints  for managing the personal budget are discussed

4.5

Ongoing review of the budget is conducted to ensure it remains relevant and to ensure updates are incorporated if necessary

REQUIRED KNOWLEDGE &SKILLS 

Knowledge requirements include :

principles of budgeting

role of credit and savings in establishing personal wealth

understanding of the financial institutions and their savings products

Skills requirements include :

communication skills including active listening and the ability to seek expert advice as required

numerical and mathematical skills as relevant to calculations of interest and loan repayments and surplus or deficit funds

EVIDENCE GUIDE 

Assessment of performance requirements in the unit may be undertaken in a range of contexts including schools, adult and community education centres, counselling services, citizens' advice bureau etc. Aspects of competency, including attainment of relevant knowledge and skills may be assessed in a formal learning environment, within the workplace or as part of another service provided to the candidate. The Evidence Guide identifies the critical aspects, knowledge and skills to be demonstrated to confirm competency for the unit. Competency is demonstrated by performance of all stated criteria including the Range Statement applicable to the learning environment.

Overview of assessment requirements 

To achieve competency in this unit, a person must be able to demonstrate:

ability to explain the benefits and purposes of budgeting

ability to prepare a budget spreadsheet

ability to explain the difference between fixed and variable expenses

ability to prepare a personal budget

ability to implement the personal budget

Critical aspects of evidence 

Evidence required for demonstration of consistent performance :

Competence in this unit must be assessed over a period of time in order to ensure consistency of performance over the Range Statement and contexts which are applicable to the individual learner and the learning environment.

Delivery /assessment relationship to other units :

This unit may be assessed on its own or it may be assessed with other units that cover related skills and knowledge.

Evidence is most relevant when provided through an integrated activity which combines the elements of competency for the unit, or a cluster of units of competency.

Assessment requirements 

Method of assessment :

For valid and reliable assessment of this unit, evidence should be gathered through a range of methods to indicate consistent performance.

Assessment of this unit of competence will usually include observation of processes and procedures, oral and/or written questioning on underpinning knowledge and skills and other methods as required.

Context of assessment :

This unit may be assessed in a formal learning environment, in the workplace or within the environment of a related service provider such as counselling or advisory services.

Resources required for assessment :

Assessment of this unit of competency requires access to information about the budgeting process, personal financial records, software and other resources relevant to the unit of competency.

The Range Statement relates to the unit of competency as a whole. It allows for different work environments and situations that will affect performance.

The following variables may be present with training and assessment depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts. If bold italicised  text is shown in Performance Criteria, details of the text are provided in the Range Statement.

The  different groups  who may budget may include:

individuals:

single

married

elderly

students

tourists, travellers

families

businesses

Governments

Different stages of life  may include:

moving out of home

studying

starting a family

buying your first home

approaching and during retirement

Financial goals  may include:

accumulating a set amount of money by a specified date in the future for the purposes of:

purchasing assets

financing holidays, educational expenses, home renovations and other known future expenses

establishing a deposit for an investment such as a home or investment property

aiming to repay existing debts and be debt free

establishing a regular savings plan

handling income and expenditure responsibly and avoiding financial difficulties

Obstacles  that might prevent financial goals being achieved may include:

being unemployed, particularly long term unemployed

insufficient income to afford items that are beyond the individual's means

unexpected circumstances such as losing a job, falling ill and not being able to work

Behaviours and skills  required for successful budgeting may include:

controlled spending

disciplined approach to money

organisational skills

record keeping skills

Budget  refers to:

a calculation of all projected income and expenditure for period of time (eg over a weekly or monthly basis)

the budget shows all projections versus actual income and expenses for the period and should be monitored

The  spreadsheet  may be:

simple or complex depending upon the extent of the individual's finances

at the very least it should have one section for recording all money received as income and another section for expenses both variable and fixed

there should then be a section to record the difference between income and expenses for the period, this being the surplus or deficit financial situation for the period

Sources of income  may include:

wages, commission, bonuses, tips

interest on investments, dividends

social security benefits, pensions, allowances, child assistance

proceeds from sale of assets

Fixed expenses  may include:

public transport

rent

rates

insurance

loan repayments if loan is based upon fixed interest rates (eg personal loans, car loans, credit card debts, Higher Education Contribution Scheme)

fees (school and university fees, bank fees)

travel including public transport, petrol

subscriptions (eg to magazines, newspapers, clubs)

Variable expenses  may include:

living expenses such as food, clothing, medical

utilities such as water, gas, electricity, telephone

mobile telephone

mortgage repayments

loan repayments if loan is based upon variable interest rates

car maintenance

miscellaneous expenses (eg gifts, tobacco, recreation, entertainment, fines)

Ways to  reduce expenses  may include:

share accommodation

moving back home

reducing expenditure on discretionary items such as expensive clothing, magazines, eating out

Ways to  increase income  may include:

taking on a part-time job or holiday work

combining part-time work with studying

investigating eligibility for student allowances or other relevant Government benefits

Handy hints  may include discussing:

the problems of impulsive buying particularly when under peer pressure

ways to cut back on spending or change negative spending habits

how to minimise fees and charges imposed by financial institutions

how to use credit card debt effectively

how to avoid getting into unnecessary financial difficulties