Budget

A BUDGET is a plan for keeping track of income and spending over a period of time. Household budgets help people set short- and long-term goals and avoid financial difficulties, such as too much debt. Budgets can be helpful, but they are not easy to implement. Remember, it takes planning and discipline to make a budget work!

Thomas and Carrie budgeted carefully and are ready to go on vacation! A budget is useful because it helps families control their spending and avoid financial difficulties, especially too much debt. Budgets are usually broken down into fixed and variable expenses. Fixed expenses are those that stay the same each month, such as rent, fixed–rate mortgage expenses, or a car payment. Variable expenses are expected expenses, but they change each month, such as gasoline or food expenses. Students should recognize that variable expenses are more easily changed than fixed expenses.

It is also important to understand the critical importance of planned versus unplanned expenses. Planned expenses, which can be fixed or variable, are those that you expect. The biggest “budget busters,” though, are the unexpected expenses, such as car repair, a failed appliance, a leaky roof, or unexpected medical costs. If at all possible, every monthly budget should include putting some money into an “emergency” savings account to use for unplanned expenses.

Budgets can be helpful, but they are not easy to implement. Remember, it takes planning and discipline to make a budget work!