I will continue on yesterday’s subject (Allowance & Budget) by developing my vision of a budget.
What is a budget
A budget is a summary of probable expenses and income for a given period. It gives you a foresight on what expenses you can expect and what you have to plan for. A well planned budget will create a surplus of money which will help you reimburse debt, save, and invest. A badly planned budget will leave you with a deficit of money, leading you to credit card debt (18% interest rate!!!) and bankruptcy.
Budget = Planning
You should see budgeting as the same as planning. I’m sure you do not leave to a party without knowing where it is (I hope not). A personal budget is the same; you need to know where you are going before you can reach there. It is extremely important to know where you are spending money, and how much you can spend.
The real question to ask yourself is the following one. Do you really know where your money goes specifically? Unfortunately, most people don’t.