Budgeting Basics

What is budgeting? Basically, it’s making sure that you’re spending less than you’re earning and planning for both the short and long term.

Unfortunately, many people think of budgeting as depriving themselves and they avoid it like they do a diet. However, just as a diet is really a program for eating, budgeting is just a program for spending. If you are hitting a mental roadblock when you hear the word “budget,” just call it by a different name, such as “personal financial planning” or “my financial freedom plan.” That’s what budgeting is, after all. It’s a proactive approach – rather than a reactive approach – to managing your money. It means making intentional choices about what happens with your money in an effort to live a better life instead of just buying whatever, whenever and hoping for the best.

Budgeting is entirely optional, but it’s an important component of financial success. It’s not difficult to implement, and it’s not just for people with limited funds. Budgeting makes it easier for people with incomes and expenses of all sizes to make conscious decisions about how they’d prefer to allocate their money. It can also help people save for retirement, emergencies, a new car, college tuition or just about anything.

For many people, having a solid budget in place, knowing how much money they have and knowing exactly where that money is going makes it easier to sleep at night. Forgoing a budget, on the other hand, can mean going into debt and failing to save for important goals. And when you’re not in control of your money, you’re not in control of your life. (For more on saving for retirement, see our Retirement Planning tutorial; Canadians, see the Registered Retirement Savings Plan tutorial.)

This budgeting tutorial will teach you everything from setting up a budget to updating it as your circumstances change, as well as getting back on track if you go off your budget. Whether you’re a college student, retiree or somewhere in between, if you’re looking for a way to manage your money better and improve your financial situation, then this tutorial is for you.