Budgets

A budget is a tool used by individuals, businesses, and governments to predict flows of money over a period of time, usually a year. A household budget lists all the sources of money for that household, such as wages from a job, loans from friends, rents, etc., and all the ways in which money will be spent, including costs for housing, school, clothes, food, phone bills, etc. Budgets can be developed for a calendar year (i.e., January to December) or a fiscal year, which is a 12-month period beginning at any time during the year. The U.S. government operates on a fiscal year that begins in October.

When we spend more money than we earn, we experience a “budget deficit”. The U.S. government has been spending more than in takes in for many years now, and the result is a national debt of about $19 trillion. For most young people, though, budget deficits are not an option. If we want to buy something, we need to save up for it. That means that we put our allowances or money we earn into a savings account rather than spending it right away. If you want to buy something that costs more than what you can spend right now, a good way to figure out how to buy it is to set up a budget for yourself.

To make your own budget, write down every single item that you spend money on, including movies, music, apps, games, and candy. Now see how much you have saved, and how much you earn either from working part time, baby-sitting, working a paper route, or from an allowance.

If the money you earn, minus the money you spend, doesn't leave you enough for that big purchase, look carefully at each item on your “spend” list to determine whether it is really necessary. If not, don't buy it, and put the money you don't spend into a savings account. By planning to set aside a certain amount each week, you will find you soon have enough money to make the big purchase. Then you can start saving up for the next one.