Background Essay: Moving Out

A budget is a way to keep track of your income and expenses so you can pay for life's necessities and at the same time plan for the future. In its simplest form, a budget is a list of all expenses and income expected over a specified period of time. Individuals and families have budgets, as do companies and governments. Budgeting is key to responsible money management.

The primary components of a budget are income, which is the amount of money you earn in a given period, and expenses, which are the things you have to pay for in that same period of time. Income is the money you earn through your work and your investments. Your expenses will vary depending on your age, but most adults pay for food, housing, utilities such as heat and electricity, telephone, transportation, clothing, entertainment, and, if they have children, childcare and education expenses.

Budgets are important because they can help ensure that you have enough income to cover all of your expenses. Budgeting requires keeping track of your earnings and your spending. If you are keeping a budget for the first time, you can figure out your expenses by writing down everything you spend money on for a month, including bills. Then, organize your expenses into categories such as food, housing, clothing, transportation, and entertainment. This will show where you spend your money.

With a budget in place, you'll know if your expenses are higher than your income. A budget can be used as a tool for figuring out where to cut back on spending so you aren’t accumulating debt by spending more money than you have. If you have something important to save for, like a house for your family or a car to get you to work, you can use your budget as a tool for saving. By looking at your income and expenses you can determine how to cut back on expenses, bring in more income, or both. Budgeting is a great way to be financially responsible, and an important planning mechanism for fulfilling your financial goals.