Topic 2: What is a budget?

Spending decisions—what do you spend your money on?

If you want to make sure you’re being smart with your money, you need at least one very important thing: a budget.

What is a budget?

A budget is a plan that will help you keep track of how much money you make, how much you spend, what you spend it on and how much you save.

We’ll look at one month as an example let’s say that when you combine your allowance and the money you earn from your part-time job you make two thousand dollars per month that total is called your income.

So what kind of budget should I use to make sure I’m being smart with my income? there’s a known rule called the 50/30/20 rule that means, as a guide, you can spend 50% of your income on your needs, 30% on your wants and put 20% in your savings.

For most people spending is easy and saving is hard, so the first thing to do is set aside the money you should be saving … save first. Eventually this is the money that will be there for you in an emergency or to put towards something expensive.