Budgeting

Budgeting is basically a way of seeing if what you have to spend is (hopefully) greater than or equal to what you spend. Once you create your budget, using one of the sample budgeting forms or worksheets below for example, you will be able to see more clearly how your financial resources or wealth and expenses, compare. But there is another element to be considered before you start this process. Time. Or more precisely for what period of time are you measuring wealth versus expenses.

Once the element of time is added to the equation, wealth, while still a part of the planning part of budgeting, must be replaced by income for the period being measured. If your wealth is based on for example, savings, investments, inheritance or borrowings, you must consider how much you are willing to use for each period of time you are budgeting. Wealth then becomes income, once time is added to the budget. If your income is primarily based on earnings from work then someone else (your employer) determines how much you have to spend for a period of time.

The most useful periods of time to budget are; the length of time between paychecks if you work, an academic term or year if you are in school or a fixed period of time such as one month or one calendar year. If you are running a business, the important periods of time may be a quarter (three months) or a fiscal year. Like the calendar year, fiscal years are normally twelve months but normally not beginning in January. The most often fiscal year used is measured from July 1 through June 30 (July through June). Quarters are usually like seasons; July–September, October-December, January-March and April-June. Income and expenses for a quarter are important for tax reporting purposes for businesses.