What is a Budget?

A budget is a plan for your money – how much money you have, how much you spend and how much you save. It helps you avoid spending everything at once and to have enough for your needs and wants by thinking about the most important things first.

Imagine receiving money as a birthday present. If you spend it all in one day, the next day you will have nothing! That is why it is important to always know how much money you have and what you want to use it for.

There are different types of budgets – i.e. weekly budget, monthly budget, budget for a specific event (visit to the zoo, etc.). Regardless of the budget, you should always follow one basic rule – the expenses should not be higher than the income. What are they?

 

Income

The money that adults earn is their income. Most often they receive a salary every month because they work as teachers, doctors, police officers, salespeople, builders, cooks and many other professions. Others have their own business – a shop, a bakery, a hair salon. They earn money by producing and selling various goods or offering services. Adults may also have additional (extra) income. For example, if they have an apartment that they have rented out. They may also have savings in a bank that have increased over time.

Children also have income. For example, if your parents give you a regular small amount as pocket money, or you receive money as a gift from relatives for birthdays or other holidays. If your parents decide, you can do small jobs for neighbours and friends for which they will give you small amounts. Your old books or toys may be useful to someone else and if your parents allow you, you can sell them to relatives or friends, as well as your crafts or drawings. The collected money is also an income. People often donate part of their income to charity. You can help good causes too. For example, by organizing bazaars at school with products made by you and your classmates and donating the funds to a child who needs support. It is possible for you to receive such help if you ever need it.

 

Expenses

The money that adults pay when they buy goods or pay for services is their expenses. For example, food and clothes for the family, electricity and internet bills, etc.

Children also have expenses. For example, if you have some money and buy ice cream with part of it, this is an expense. Expenses can be for important things - for necessities such as food, clothes, school supplies, as well as for things that are not mandatory, such as toys or entertainment.

When you have money do you make plans on what to spend it on or what to save some of it for? If you plan your money well, you will always be able to have enough for the most important things. A budget will help you with this.

 

How to make a budget?

You can follow these few steps and create your weekly budget.

1. Write down how much money you have on a piece of paper

To avoid missing any amounts, it is a good idea to describe them. For example, how much euros you have in pocket money for the week, how much from walking the neighbour’s dog.

2. Describe your expenses

Describe what you plan to buy during the week. For example, workbooks, snacks, a toy, a treat, etc.

3. Set a savings goal

Think about whether you want to buy something bigger and more expensive in the future. How much money can you save per week in your piggy bank?

4. Distribute the money wisely

First, set aside the money you decide to save. When you start to allocate what to spend the remaining amount on, consider which of the things on your list are needs and which are wants. If the money won't be enough for everyone, cross out a want.

And most importantly, the purpose of a budget is to help you avoid spending everything at once. Always think carefully before you buy something – do you really need and want it? It’s also a good idea to determine how much money you can spend per day and not exceed that amount.

Remember that if you plan properly, you will always have money for the important things and you will be able to make your wishes come true!