Budgets

What is a budget? A budget is a plan for the use or management of money. In order to budget your money, you need to know where the money you have comes from and where you spend your money. A budget consists of two things: income and expenses.

Sources of Income Income is any money that you receive. Sources of income include: Take home pay (wages) Overtime pay Bonuses Cash gifts for birthdays/special occasions Many more….

Expenses Expenses are things you spend your money on. There are two types of expenses: fixed and flexible.

Fixed Expenses Fixed expenses are a set amount of money due on a set date. Examples: Rent or mortgage Insurance Installment payments (cars, credit cards, etc.) Tuition Taxes Fixed expenses must be considered first when making a budget.

Flexible Expenses Flexible expenses are expenses that vary in amount. Examples: Food Clothing Transportation Medical needs You have more control over flexible expenses than you do fixed.

Planning a budget Steps to planning a budget: Estimate your income List your fixed expenses Review your short and long term goals Estimate your flexible expenses Set aside money for savings To have a workable budget, your income must be greater or equal to your total expenses.

Needs vs. Wants Needs: items that a person must have in order to live Wants: items that a person would like to have, but are not required

Budget Chart Budget Income Expenses Fixed Flexible Estimated income (add all income together) - Expenses (subtract fixed and flexible from income) Balance Positive balance: where could this money go? Negative balance: debt – where can you get money to cover this?