2.1
A budget is a plan for how you spend your money. And it’s not just for adults with full-time jobs—it’s for you too. Even if you don’t have a lot of money right now or if you’re just making minimum wage, you still need to have a plan for how you’re going to spend your money every month. You need a budget! Words of Wisdom This is your wealth we’re talking
What Is a Budget?
money received for work, as a gift, or through investments
Income
a cash-flow plan that assigns an expense to every dollar of your income; the goal is for the total income minus the total expenses to equal zero
Zero-Based Budget
a record that summarizes all of the income and outgo (spending) over a certain time period
Cash-Flow Statement
income that comes in at different amounts or at different times, or both
Irregular Income
A budget is one of those things that most people know they should do, but few of them actually create and stick to a budget—as you can see in the graphic above. So, what’s the deal?
Budgeting Provides Freedom
expense that remains the same from month to month
Fixed Expense
what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay
Net Income
You’ve walked through all the steps to create your budget: You’ve identified your income and listed out all your expenses. You added it all up, subtracted, made a few adjustments, and finally got it to zero. That’s awesome! Now what? Creating your budget is just the first half of successful budgeting. Now that you have a budget, you need to put your budget to work and stick to it. The second half of successful budgeting is tracking your expenses to make sure you’re sticking to your plan—and know where to adjust your budget when you need to. Yes! You can do that!
Successful Budgeting
earnings based on a percentage of the sales made
Commission
Budget: a written plan for giving, saving, and spending
Key term
expense that varies in dollar amount from month to month but that you can expect to have every month
Variable Expense
the amount you earn before taxes and other payroll deductions
Gross Income
Tracking your expenses is even simpler than creating a budget. When you spend money, just record how much you spent and subtract it from the budget category. You can instantly see how much money is still available in that category. Sometimes you’ll make a purchase that falls into more than one category. For example, if you buy a $20 T-shirt for yourself and one as a gift for your friend at the same store, you’ll need to split that transaction so that $20 comes out of your Gifts category and $20 comes out of your Clothing category.
How to Track Your Expenses
Now you know everything that goes into creating your own zero-based budget—and how to stick to it so all that effort literally pays off! Budgeting isn’t a “set it and forget it” activity. The budget you make for this month won’t work for next month. You need to make a new budget each month before the month begins. We like to call that “on paper, on purpose.” (Don’t sweat the “on paper” part—using an app works just as well, maybe even better!)
Your Monthly Budget
It’s so important to use a budget—so you’re in control of your money, and you don’t have to wonder where it all went.
The Purpose of a Budget
expense that occurs at various times throughout the year and tends to be in large, lump sums
Intermittent Expense
After high school and college, your income and budget will change. You’ll have more money, more expenses, and maybe even a spouse and a family who depend on your income. Those life changes will affect your finances, your goals, and your priorities.
Looking Toward the Future
You’ll have times—especially when you’re new to budgeting—that you go over your budget in a category. It’s not a huge deal as long as you deal with it right away. Unless you work overtime or bring in some extra income, you’ll need to adjust your budget for the month. That means you’ll have to cut back on how much you planned for one category to balance out what you overspent in another. Then, when you make your budget for next month, review everything you spent.
What if You Go Over?
Now, maybe you’re wondering if you even have enough money to budget right now because you’re in high school. Yes, you do! Even if you don’t have a part-time job, you might get money from your parents or get paid for odd jobs every now and then, like babysitting. Plus, you probably get money for your birthday or Christmas. You get money, so you need a budget! You definitely spend money! Maybe you pay for your gas, clothes, or your cell phone bill. So, you need a budget!
Do I Budget in High School?
Your biggest wealth-building tool is your income—and the best way to make the most of your income is to create and stick to a monthly budget.
Winning With Money
expense for things you don’t need
Discretionary (Nonessential) Expense
Build wealth and give.
The Fifth Foundation
The envelope system has been around for a long time—mostly because it works! You can use the envelope system no matter how you choose to set up your budget. It even works well with budgeting apps.
The Envelope System
Save a $500 emergency fund.
The First Foundation