What Is a Budget?

Some people say, “I’m on a budget,” and mean nothing more than that they are limiting their expenditures. “I can’t go to dinner at Chez Pierre’s tonight because I’m on a budget.” In that sense, pretty much everyone is on a budget—after all, how many of us can spend money without limitations?

In another sense, a budget is a way to keep precise track of your money, how much comes in and how much goes out, and to determine how much you can and cannot spend on various things. Money that comes in is divided among the various budget categories, such as mortgage or rent, groceries, and entertainment. Each expense is likewise charged against the corresponding category. There are two main advantages to a budget.

One advantage is that after a few months you will have a pretty good idea of where your money is going. Most of us know how much we spend on things such as rent and car payment, but when it comes to less defined expenses, such as clothing and dining out, we are often in the dark—or worse, under a serious misconception. A friend of mine, for example, was flabbergasted when he started a budget and soon learned he was spending almost $300 per month on restaurant meals and take-out food. That was more than twice what he thought he was spending and he soon took corrective measures. He learned some basic cooking skills and now eats at home much more often. The end result is that he now has an extra $150–$200 per month he can put toward more important things, such as saving for a vacation.

Taken From : Manage Your Money and Investments with Microsoft Excel

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.