Definition
A budget is a schedule of income and expenses for a specified period of time.
Analysis
Budgets are used by businesses to plan operations and anticipate revenue needs. Consumers also need to plan purchases and anticipate cash needs by establishing a budget.
Most households do not have a written budget. As a result, most households do not even know where much of their money goes each month.
Budgets can cover any period of time. Whereas most businesses develop an annual budget, consumer normally create a budget for a given month. Many households living paycheck-to-paycheck fail to plan beyond the next pay period.
A budget will have income for the period as well as anticipated expenses for that same period. If expenses equal income, then the budget is balanced. Otherwise, the budget will reflect either a surplus or a deficit. Unfortunately, most U.S. households are running on a budget deficit.
A budget should balance, with any surplus put into savings. Otherwise, the excess is wasted on additional expenses which eliminates any surplus. Here is an example of the Smith family budget:
| Monthly Budget | ||
| Income | ||
| Mr. Smith | ||
| Primary | $2,300.00 | |
| Part Time | $0.00 | |
| Mrs. Smith | ||
| Primary | $0.00 | |
| Part Time | $1,400.00 | |
| Total Monthly Income | $3,700.00 | |
| Expenses | ||
| Mortgage | $950.00 | |
| Homeowners Assoc | $90.00 | |
| Property Tax | $100.00 | |
| Home Insurance | $40.00 | |
| Electricity | $110.00 | |
| Water | $40.00 | |
| Trash | $12.00 | |
| Cable | $85.00 | |
| Telephone | $135.00 | |
| Car Payment | $575.00 | |
| Gasoline | $325.00 | |
| Car Insurance | $120.00 | |
| Car Maintenance | $50.00 | |
| Groceries | $325.00 | |
| Dining Out | $100.00 | |
| School Loans | $140.00 | |
| Credit Cards | $250.00 | |
| Miscellaneous | $75.00 | |
| Savings | $178.00 | |
| Total Monthly Expenses | $3,700.00 | |
