Budgeting is a crucial part of everyday life, yet many people have no idea how to write or stick to a budget.
What is a budget?
A budget is simply a list of income versus expenditure. It lists all your planned revenue and expenses so that you can ensure there is enough to pay the bills.
Different types of budgets need to be drawn up for different needs. For instance, these budgets are all very different:
- Personal budget.
- Business budget.
- Event budget.
- Government budget.
- Monthly cash flow.
- Yearly revenue versus expenditure.
The word 'budget' comes from an old French word, 'bougette' meaning 'purse'.
Writing a budget
A simple budget is a straightforward process.
- List all your income sources in a spreadsheet.
- List all your bills.
- Decide on a timeframe for your calculations, eg. monthly, fortnightly.
- Calculate what you earn from each income source in that timeframe.
- Calculate how much you need to spend on each bill in that timeframe.
- Add up the income and the expenditure and work out what the difference is.
More complex budgets
Once simple budgeting is second-nature, you might consider more complex budgets, such as cash flow budgeting, planning for future events, savings and other personal financial goals.
Image Credit: Alan Cleaver