I’ve talked a lot about budgeting in previous posts.  But what exactly is a budget?  A budget is basically a blueprint of where you expect to spend money for a given period.  For most people, that period is a month.  It’s a list of where every dollar that comes into the household is going to be allocated.

So what exactly do you do?  First, you need to figure out your total net income for the month.  Income includes what you bring in from a job, or any other source.  Total that up to determine the total income.  Then, list your expenses.  These include things like savings, rent or mortgage, utilities, insurances, food (both grocery and restaurant), etc.  Then subtract these expenses from your total income.  

If you have money left over, then that’s awesome!  You can add to your emergency fund, contribute more to retirement savings, etc.  But, what if you have more in expenses than you have in income?  That’s where you are going to have to make changes (remember yesterday’s post?).  You may have to increase your income by getting a second job.  You may have to cut some of your expenses.  And this is where it gets painful.  You can’t spend more than you have so decisions have to be made.

What is the moral of this story?

Today’s post discusses what a budget is.  If you want a more in depth discussion, read my book.  But I have provided a very brief description of what a budget is and how to create one.  I’ve also explained that budgeting can be painful if there’s not enough money to fund your expenses.  And as previously mentioned, I discussed making financial changes yesterday can be painful.  Start creating your budget to get a realistic picture of where you’re at.  It may be eye opening.