What is a Budget (E) Rated?
You’ve likely heard the word Budget before. Maybe you’ve tried using one in the past, or maybe not…Either way, I’m going to make sure you’re comfortable with just what exactly a Budget is. Let’s start with the definition of a Budget from our good friend Google. According to the Oxford Dictionary, a Budget is an estimate of income and expenditures for a set period of time. Hmmm…those are some fairly intimidating words. I mean, who says expenditures on a regular basis? Let’s break the idea of a Budget down and relate it to something most people can get their heads around.
First up, an estimate of income is just a fancy way of saying how much money you make. Then we have expenditures, or the ways your money goes out the door. Some people refer to these as expenses. As far as a set period of time goes, that’s just the window of time you’re looking at (a day, week, month, year, etc.). For reference, I track how much I make (after taxes and pretax deductions – like a 401k) and how much I spend on a monthly basis.
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This Budget Planner can help get you started!
Now it’s time for the analogy –
or me relating the idea of a Budget to something you’re likely more comfortable with – EATING! I don’t know about you but I love a huge plate of nachos! Nachos are problematic for me though. If I eat too many, I notice a bit of pudge in my gut area. The pudge is really just a numbers game – very much like a Budget. If I eat 2,500 calories (many of which come from the nachos) in a day and only use, or spend, 2,200 of those calories the same day, well…eventually I gain weight.
If you compare your diet to a Budget, those scrumptious nachos are like your income – the money you bring home each month. The calories you burn are like your expenditures, or the money you spend each month. Unfortunately, gaining weight by having too many calories coming in vs. going out isn’t always a good thing. However, adding some cash, or pudge, to your bank account definitely is a good thing!
So, a Budget is like your diet
If you eat more calories than you burn, you stand to gain weight. If you earn more money than you spend, your bank account gets pudgy. A Budget is just a tool to help you understand the money you have coming in vs. the money you have going out each day, week, month, or year (I prefer tracking it monthly). If only my bank account grew in size based on the amount of nachos I eat…