"Isn't a budget just the money you have left over after all the bills are paid," she asked inquisitively.
"I can see why you might think that, but no. A budget isn't just the money you have left over after all the bills." I had engaged this sudden conversation because helping others better understand what a budget is and how it can be useful to them is somewhat of a passion of mine lately.
"If that isn't true, then what is a budget?"
"Excellent question! A budget is basically your plan for spending money for an entire month."
"Wait, you mean even for the bills and stuff?"
"Yes, even for the bills and stuff. You see, a budget helps you see where you want your money to go and also where you end up sending it."
"Huh? I'm confused. What do you mean by 'sending' it? I thought you spent money."
"Indeed you do, but isn't that also sending it away from you? Aren't you presenting someone or some company your money in exchange for something like food or electricity?"
"I guess that's true. But what is a budget supposed to look like. I know I need to do it better but I'm not sure where to start!"
"If I may, I can help you get started by showing you how you to build one from scratch."
"That would be really helpful. How do you start building a budget?"
"The first thing you do when building a budget from scratch is write down your total household income for the next month. Ideally you are doing this before the next month begins. For example, we are currently in June. I would be challenging you to create a budget for July now."
"Why would I want to create it for July? We are still in the middle of June!"
"I get that. Because we are in the middle of June it is difficult to separate what you want to do from what you have already done as far as spending money. A good budget is set up beforehand. That way you know the goals targets you have to reach throughout the month."
"That makes sense. Can you stay a little while longer and help me through this? There seems to be a lot of stuff to get through to do this right."
"Indeed there is. I've got some more time and I'd be happy to help you out more. Let's dig in!"
Always look forward to your posts, thanks Todd, have a good weekend.