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Lesson 3: When the Budget Breaks

About 30 minutes — Discussion-based lesson

What You Will Learn

This lesson covers:

What happens when expenses exceed income

This section covers the key ideas about what happens when expenses exceed income. Discuss with your group or family and explore the concepts together.

The basics of debt: borrowing money you do not have

This section covers the key ideas about the basics of debt: borrowing money you do not have. Discuss with your group or family and explore the concepts together.

Why debt grows: the cost of borrowing

This section covers the key ideas about why debt grows: the cost of borrowing. Discuss with your group or family and explore the concepts together.

Getting back on track: adjusting your budget

This section covers the key ideas about getting back on track: adjusting your budget. Discuss with your group or family and explore the concepts together.

Check Your Understanding

1. What happens when you spend more than you earn?

Answer: You run out of money before the month ends, or you have to borrow. This creates debt — money you owe to someone else.

2. What is debt?

Answer: Debt is money you owe because you spent more than you had. It usually has to be paid back with extra (interest), making it cost more over time.

3. Why does debt grow over time?

Answer: Because of interest — the cost of borrowing. If you owe $100 and interest is added, you might end up paying back $110 or more.

4. How can you fix a broken budget?

Answer: Look at your spending, find wants you can cut, reduce variable expenses, and make a new plan. The key is adjusting, not giving up.

Key Takeaways

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Continue to Lesson 4: Sadaqah as a Budget Line

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