What is a Budget

For some, managing their money is a natural and everyday process that just makes sense.  But there are many people who just don’t understand what it takes to efficiently plan and utilize the financial resources they have.  If you understand what a budget is, but have no idea how to create one or why you even need one, then this is the place to be.

what a budget is:

  • A plan
  • Categories of things you buy (expenses) and money you receive (income)
  • A way to balance income and expenses
  • A tool

What a budget is not

  • A bank account
  • A way to lose control over your money
  • An annoyance

There is one thing to know right away with a budget.  A budget should not limit you to the point where it becomes a nuisance .  The reason for creating a budget is to free your money up so that you can use it how you really want to.  Trying to save for a car?  A budget will help you plan and keep track of how close you are and how long it will take.

A budget can look many different ways, but every budget usually contains a few elements.  These can appear differently or be given different weighting based on the individual.  Let’s review these elements:

Time Frame

You can budget for the week, the month, the quarter, even the year.  You do not have to stick to any time frame, but choosing the one that is best for you is beneficial to giving you the best picture of where your finances are at.  The time frame most likely depends on how often you pay certain bills or how often you are paid.


You need to know all the sources of money coming to you.  Whether pay checks, social security, pensions or any other way you make money.  These should be kept track of in a budget.


The biggest reason people fail to efficiently handle money is because they have no idea where it goes.  On your budget you will need to create categories for the things you spend money on such as auto expenses, clothes, and food.  Tracking all of these purchases gives you a picture of where you money is going.

Those are main elements.  We will get into more on these elements in future posts, but for fun, here is a sample budget.

Sample Monthly Budget


Payroll: $2300

Lawn Cutting: $200


Food: $200

Gas: $150

Health Insurance: $175

Income Taxes: $650

Auto Insurance: $65

Cell Phone: $60

Student Loan Payments: $600

Total After Expenses: $600

Savings: $400

Total non-discretionary Funds Available: $200

By looking at the sample monthly budget, we know there is $200 per month to spend on extra things.  That is, unless there is an overspend in one of the categories.  By a simple list like this, you can easily figure out where your money will go and how much extra you will have.  We will get into more detailed budgeting in the future.

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