What's a Budget?

A budget is a plan for how you'll spend the money you have so that you can pay your bills, increase your savings, and reach your goals.

It isn't easy to create a budget and stick to it, but it's the best way to keep your finances under control and stay out of debt. The key is to make sure you're spending your money wisely on what's most important to you.


The money you have, called your income, includes:

  • Your regular take-home pay from work. It's sometimes called your net income, and is less than your gross income, because taxes and other deductions have been taken out.
  • Money you receive regularly from your parents, grandparents, or other sources, if you're not supporting yourself.

Your expenses include everything you pay for. The total amount you spend should be equal to or less than your income.

If you regularly spend more than your income, you have a choice. You can earn more or you'll have to cut your spending. That means deciding which expenses can be reduced. If you don't do one or the other, or both, you risk going into debt.
If you're making your first budget, try planning for six months. That's long enough to see if you really can keep your spending less than your income. Then you can make adjustments, if they're necessary, for the next six months.