What is a budget, and why is it important?
A budget is a tool to help you balance your expenses with your income. Some say it helps you establish the difference between your wants and needs. A balanced budget ensures you don’t spend more than you take. In fact, balancing a budget is the most foundational skill of personal finance, which is why it’s so important.
Steps to manage a budget
- Create a one-month estimated budget
- Track a month of actual budget incomes
- Track a month of actual budget expenses
- Compare the two budgets (Estimated vs Actual)
- What did you notice about how much you’re spending compared to how much you earn?
- Where do you think you can make changes to your spending so that you can start saving a little bit each month?
- Create an expected budget for the next 12 months
- Begin to track and adjust as needed