Christine Parker: Hi! I am Christine Parker, and I am a financial planner and member of the Financial Planning Association. I am here to discuss budgeting. Right now I am going to talk about the definition of a budget.
A budget is a snapshot of your current finances at a particular point in time. It includes a detailed list of what your income is and where it comes from, and equally detailed list of how much you're spending and where you're spending in. At the same time a budget is a plan for the future spending and also how you'll cover that unexpected cost.
You maybe wondering, how in the world can you plan for the unexpected? The answer is by creating an emergency fund that holds up to three months, and better yet, six months of living expenses in case you are ill, you are temporarily out of work, or you have a major unexpected repair on your home or car.
Anyone who wants to take control of their finances can benefit from a budget. It can uncover spending and earning patterns that maybe creating problems for you financially. So you can decide what you want to change.
Budgeting can be a very rewarding process, particularly when it relieves the stress that comes from worrying about how to make ends meet. It also frees up cash to put towards your goals that will improve your life. With a budget, you take control of your money and that provides great peace of mind.
Think of it this way, businesses have budgets so that they can track their money and make the best use of their resources. You should have a budget for the same reasons. If you're married or a couple, plan to talk about your budget together. Now that you know what a budget is, let's move on to what you need to create a budget.