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What does budgeting mean?

Budgeting is a kind of balance between income and expenses. It helps you plan out your expenses and manage them in advance of paying them so you can ensure that you have more than enough money in reserve to cover your expenses. Expenses can be itemized within categories (for example, housing, utilities, food, entertainment, transportation, insurance, personal care, vacation and savings could all be budget items) and are over the time period you intend to manage (say weekly, monthly or annually).

Some expense items can be variable (i.e., they don't occur on a regular and predictable basis) and some are the same every month. Budget items are deducted from income. In the ideal budget, there are savings after expenses. The most basic of budgets balances income and expenses. When expenses exceed income, you are spending your reserve savings, and action should be taken to cut expenses or increase income to restore the balance.

 

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