What is a Budget?
Budget is nothing but making a plan to spend our money. It is drawing up a spending plan for the resources we have. It allows us to determine in advance our future goal and the way to get there. In case we do not have sufficient money, it helps us to prioritize and spend on the more important items and avoid or postpone the others, so that we can have the money required for the envisaged financial goal. When we are faced with too many items to spend on with our limited resources, then we need to separate the items based on what is basic and what is discretionary, and then prioritize among the basic needs. It helps us to focus on the things that we need and prioritize our spending accordingly. This will enable us to save money for our greater goals and in the light of it to spend only on our actual needs and not on all our wants. Thus, it is a blueprint of our financial planning. It is a roadmap or plan to achieve specific goals by managing our priorities and planning the use of money accordingly.
The starting point of a Budget
Making a budget always begins with the resources available to us. It is nothing but what we can count as our income. When we say ‘income,’ we mean what we can be sure of–regular salary, rental income, interest income, etc. Thus, the starting point for any budget is our actual income.
Two kinds of Budgets
Budgets can be of two types: (a) activity budget, and (b) goal-oriented budget.
Fr Alex Gnanapragasam SJ
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