text: What Is a Budget?
  A budget refers to an estimation of revenue and expenses that's made for a specified future period of time. Budgeting usually occurs on an ongoing basis, with individual budgets being re-evaluated regularly.
  Budgets can be made for any entity that needs or wants to spend money, including governments and businesses, people, and households of any income level.
  - A budget is an estimation of revenue and expenses utilized by governments, businesses, and individuals of any income level.
  - A budget is a financial plan for a defined period that can greatly enhance the success of any financial undertaking.
  - Corporate budgets are essential for operating at peak efficiency.
  - Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and planning contingencies.
  - Personal budgets are extremely useful in helping individuals and families manage their finances.
  A budget is a microeconomic concept that reveals the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a surplus budget means profits are anticipated, a balanced budget means revenues are expected to equal expenses, and a deficit budget means expenses will exceed revenues. These principles hold true whether the budget is intended for an individual, a family, or a company.
  First, let's take a quick look at the budgeting process for a corporation, and then personal budgeting.
  Budgets are an integral part of running any business efficiently and effectively.
  Budget Development Process
  Corporate budgeting begins by establishing assumptions for the upcoming budget period. These assumptions are related to projected sales trends, cost trends, and the overall economic outlook of the market, industry, or sector. Specific factors affecting potential expenses are addressed and monitored.
  The budget is published in a packet that outlines the standards and procedures used to develop it, including the assumptions about the markets, key relationships with vendors that provide discounts, and explanations of how certain calculations were made.
  The sales budget is often the first to be developed, as subsequent expense budgets cannot be established without knowing future cash flows. Budgets are developed for all the different subsidiaries, divisions, and departments within an organization. For a manufacturer, a separate budget is often developed for direct materials, labor, and overhead.
  All budgets get rolled up into the master budget, which also includes budgeted financial statements, forecasts of cash inflows and outflows, and an overall financing plan. At a corporation, the top management reviews the budget and submits it for approval to the board of directors.
  Static vs. Flexible Budgets
  There are two major types of budgets: static budgets and flexible budgets. A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same.
  A flexible budget has a relational value to certain variables. The dollar amounts listed on a flexible budget change based on sales levels, production levels, or other external economic factors.
  Both types of budgets are useful for management. A static budget evaluates the effectiveness of the original budgeting process, while a flexible budget provides deeper insight into business operations.
  Derek Notman, CFP®, ChFC, CLU
  Intrepid Wealth Partners, LLC, Madison, WI
  The importance of budgeting cannot be understated. A budget, also known as cash flow, is arguably more important than the actual cash that you have in your bank and investment accounts. Your cash flow is what allows you to pay for everything (or not).
  Without knowing your cash flow, you could be putting yourself into a bad financial situation and not even know it. You can only get by without knowing your cash flow for so long before you get into financial trouble, so make the time to know the flow of your cash. Budgeting should be something that everyone does, regardless of their financial situation.
  Individuals and families can have budgets, too. Creating and using a budget is not just for those who need to closely monitor their cash flows from month to month because money is tight. Almost everyone can benefit from budgeting—even people with large paychecks and plenty of money in the bank may find it difficult to cover the expense of an unexpected home repair.
  To manage your monthly expenses, prepare for life's unpredictable events, and afford big-ticket items without going into debt, budgeting is essential. Keeping track of how much you earn doesn't require you to be a math whiz and doesn't mean you can't buy the things you want.
  What it does mean is that you can maintain control over where your money goes and enjoy greater financial confidence and success.
  How to Create a Budget
  The specifics of budgeting will depend on your personal financial situation and goals. In most cases, though, the approach is the same no matter where you stand financially. Follow these seven steps to create your budget and adjust it as needed to reach specific financial goals.
  - Add up all your income. This should include all income sources, such as a wages, salaries, tips, Social Security payments, disability, alimony, and investment income.
  - Calculate your expenses. These are expenses you must pay each month, such as your mortgage or rent, food, transportation costs including gas, insurance premiums, taxes, childcare, internet service, your cell phone bill, and other utility payments.
  - Identify debt payments. Be sure to include your debt, such as loans and credit card payments. Determine the minimum payment for each debt. Subtract that from your income as well.
  - Review your spending. Keep track of every dollar you spend, whether you pay with a credit card or cash, to determine what your real expenses are. Keep your receipts and note down additional spending that you hadn't budgeted for.
  - Create a spending plan. The amount of income you have left is what you can spend on discretionary expenses. These can include additional debt payments or rainy day savings. Your plan should also include things like entertainment or surprise expenses. Give every dollar a job, based on your goals and what you discovered when you tracked your spending.
  - Set financial goals. Do you want to save money? Pay off debt? Stop spending more than you have? Decide on realistic goals. Remember, you can adjust these over time. Work on the most pressing goals first, such as paying off debt or creating an emergency fund.
  - Adjust each month. Each month, look at your spending and whether you progressed toward or achieved goals, Reevaluate and adjust where you assign your discretionary spending. A flexible budget will help you avoid overspending.
  Once you've created a budget, you may have to do some juggling, especially in the first few months. This means adjusting spending here and there so that you stay within your planned budget for income and expenses. And be sure to put it in writing: If you see it and commit to it, you'll have more incentive to stick to it.
  11 Budgeting Myths That Can Block Your Success
  Budgeting is a wonderful tool for managing your finances, but many people think it's not for them. It's important to become aware of budgeting myths—the erroneous logic that stops people from keeping track of their money and allocating it in ways that benefit them most. Then, you can create a budget that can help you live within your means, reach important goals, and build lasting wealth. Here are 11 budgeting myths.
  1. I Don't Need to Budget
  Getting and keeping a handle on your monthly income and expenses allows you to make sure that your hard-earned money is being put to its highest and best purpose. For those who enjoy an income that covers all bills with money left over, a budget can help maximize savings and investments.
  If one's monthly expenses typically consume the lion's share of net income, any budget should focus on identifying and classifying all the expenses that occur during the month, quarter, and year. And for people whose cash flow is tight, the budget can be crucial to identifying expenses that could be reduced or cut, and minimizing any wasteful interest being paid on credit cards or other debt.
  2. I'm Not Great at Math
  Generally speaking, you don't need to be great at math to make and follow a budget. First of all, understanding general concepts relating to your income, spending, debt, saving, and allocating your funds are important. Then, the basic ability to add and subtract is most of what's called for. That's especially true if you're budgeting manually, with pencil and paper.
  And now, thanks to budgeting software programs, math barely enters into it. You simply have to be able to follow instructions. Many of these programs are free and legitimate. Or, if you know how to use spreadsheet software, you can make your own ledger. It's as simple as creating one column for your income, another column for your expenses, and then keeping a running tab on the difference between the two.
  3. My Job Is Secure
  No one's job is truly safe. If you work for a corporation, being laid off due to a difficult economy, downsizing, or a takeover always is a possibility. If you work for a small company, it could die with its owner, be bought out, or just fold.
  You should always be prepared for a job loss by having at least three months' worth of living expenses in the bank. It's easier to accumulate this financial cushion if you know the amount you're bringing in and spending each month, which can be monitored with a budget.
  4. Unemployment Insurance Will Tide Me Over
  Unemployment compensation is not a sure thing. Let's say a bad situation at work leaves you with no choice but to quit your job. Unless you can prove constructive discharge (that is, that you were virtually forced to resign), your departure will be considered voluntary, making you ineligible for unemployment insurance. Besides, the benefits may fall well short of the wages you're used to: in even the highest paying states, the average is less than $500 per week.
  5. I Don't Want To Deprive Myself
  Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The aim of budgeting is to make sure you're able to spend on what's needed and save a little each month, ideally at least 10% of your income. At the very least, budgeting can make sure that you aren't spending more than you earn.
  Unless you're on a very tight budget, you should be able to buy baseball tickets and go out to eat. Tracking your expenses does not change the amount of money you have available to spend every month. It just shows you where that money is going and allows you to make decisions about changing your spending habits.
  6. I Don't Want Anything Big
  If you don't have any major savings goals (e.g., upsizing your living situation, starting your own business), it's hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes likely will change over time.
  Let's say that you and your partner live in New York City in a small one-bedroom apartment and things are going fine for both of you until your family dynamic changes. For instance, you may have a child or an in-law who comes to stay with you indefinitely. This may mean you'll need (and want) more room to accommodate the new addition. If you don't save up for anything big, you may not be able to afford this change in your living situation down the road.
  7. I Won't Qualify for Student Financial Aid
  Yes, the catch-22 of student financial aid is that the more money you have, the less aid you'll be eligible for. That's enough to make anyone wonder if it isn't better to spend it all and have no savings in order to qualify for the maximum amount of grants and loans.
  But that catch mainly applies to earned income. Whether you are an adult student going back to school or the parent of a student headed to college, the Free Application for Federal Student Aid (FAFSA) form (used for Stafford Loans, Perkins Loans, or Pell Grants), does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts.
  So if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your mortgage, or contribute more money to your retirement accounts. The savings that you put into these assets can still be accessed if you face an emergency, but you won't be penalized for it.
  Even if you employ all the available legal strategies to maximize your financial aid eligibility, you still won't always qualify for as much aid as you need. So it's not a bad idea to have your own source of funds to make up for any shortfall.
  8. I'm Debt-Free
  Good for you! But being debt-free without any savings won't pay your bills in an emergency. A zero balance can quickly become a negative balance if you don't have a safety net. Budgeting can help you create one.
  9. I Always Get a Raise or Tax Refund
  It's never a good idea to count on unpredictable sources of income. This may be the year that your company is unable to give you a raise (or as much of a raise as you hope for). The same is true of bonus money. Tax refunds are more reliable, but this depends in part on how good you are at calculating your own tax liability.
  Some people know how to figure how much they'll get in a refund (or how much they will owe) as well as how to adjust this figure through changes in payroll withholding throughout the year. However, changes in tax deductions, IRS regulations, or other life events can mean a nasty surprise when you prepare your tax return.
  10. I Just Don't Have the Discipline
  If you're still not convinced that budgeting is for you, here's a way to protect yourself from your own spending habits. Set up an automatic transfer from your checking account to a savings account that you don't see regularly (i.e., at a different bank). Schedule the transfer to happen right after you get paid.
  If you are saving for retirement, you may have the option of contributing a set amount regularly to a 401(k) or other retirement savings plan. This way, you can pay yourself first, have enough money for the transfer, and know that you can meet your savings goal.
  11. It's a Luxury When I Barely Have Enough for the Essentials
  Sometimes budgeting just isn't a priority because you have too much on your plate. But there are certain government programs that can help you manage your household expenses. For instance, the Supplemental Nutrition Assistance Program (SNAP) helps recipients of all income levels work with their food budgets to make their benefits go further.
  At the very least, set up that budget so you get a feel for spending limits, any change in how you originally planned to allocate your funds, whether you're paying all you can to get rid of debt, or whether your slipping too far into debt.
  In general, traditional budgeting starts with tracking expenses, eliminating debt, and, once the budget is balanced, building an emergency fund. But to speed up the process, you could start by building a partial emergency fund.
  This emergency fund acts as a buffer as the rest of the budget is put in place and should replace the use of credit cards for emergency situations.
  The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it, and if possible, putting in whatever you can spare on top. This will get you to think about your spending, too.
  You should only use your emergency fund for true emergencies. For instance, if you lose your job and need to pay for expenses, you could tap into your rainy day fund until you join the workforce again. You can also use this money if you have an unexpected medical emergency that arises.
  You would save money if you used your emergency fund to eliminate credit card debt, but the purpose of the fund is to prevent you from having to use your credit card for paying for unexpected expenses. With a proper emergency fund, you will not need your credit card to keep you afloat when something goes wrong.
  Downsize and Substitute
  Once you have a buffer between you and high-interest debt, you can start the process of downsizing. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest.
  This can be a process of substitution as much as elimination. For example, cancel any recurring subscriptions that you don't regularly use or need. Use half of the money you save to invest for a goal or to pay off outstanding debts. Save the other half to bulk up your emergency fund.
  Although eliminating expenses entirely is the fastest way to a solid budget, substitution tends to have more lasting effects. So consider:
  - Shopping with friends and family so you can split the cost, especially if you buy in bulk
  - Carpooling or taking public transportation to cut down on car-related costs
  People can sometimes cut too many expenses so that they end up with a budget that they can't stick to. Substitution, in contrast, keeps the basics while trimming costs.
  Find New Sources of Income
  Once you have your budget in place and have more money coming in than going out, you can start investing to create more income.
  It is better to have no debt before you begin investing. If you are young, however, the rewards of investing in higher-risk, high-return securities like stocks can outweigh most low-interest debt over time.
  Keep your receipts so that you know exactly how much you spend each month. This can help you determine how much to budget for any expenses that may change from month to month.
  Sticking to a Budget
  You've got your budget set up. Now you've got to stick to it. But that credit card still calls your name, your clothes budget seems awfully small, and you feel deprived. At such moments, it helps to revisit the whole reason for a budget—to help you manage your finances, achieve financial goals, and lead a life free from fear of financial pitfalls.
  Remember the Big Picture
  Your budget can keep you out of overwhelming debt and help you build a financial future that will give you more freedom, not less. So think about the future you want and remember that keeping to your budget will help you get there. Adding to your debt load, on the other hand, will mean that your financial future could be less bright.
  Review Your Spending
  Every time you enter your spending in your software or budget notebook, review everything that's been spent to date and compare it to income received. This will keep you abreast of where things stand and encourage you to keep at it, especially if you are reining in your spending as intended. This daily or weekly activity can give you an enormous sense of accomplishment and keep you on track.
  Remove the Options That Allow You to Cheat
  Make it more difficult to make impulse purchases. In other words, set up barriers that give you time to think: "Is this purchase necessary?" Opt out of retailer email lists. Remove your stored payment information on your favorite online shops so you can't just click to order. Adjust your phone settings to block tracking and advertising as much as possible.
  Find Some Support
  If you feel like you're the only one in your group who is on a budget, search for some like-minded folks. You could find an online forum, a monthly meeting, or even a couple of friends who will listen to your concerns and share their budgeting experiences. Set up accountability calls with your frugal buddies to talk things over and keep temptation at bay.
  Just know that you're not the only person setting sensible financial limits for yourself.
  Go Old School
  There's something powerful about handing over a stack of $20 bills for a purchase. You have to confront the money you're about to spend and accept that the spending is worth it. Swiping a debit card, on the other hand, may not feel nearly as real.
  Similarly, paying bills by writing checks and promptly entering the sums in your register keeps you up-to-date on how your account is affected in a way that autopay doesn't.
  You don't have to use cash exclusively or completely forgo online payments. But handling transactions in hands-on ways can make you realize how much you're spending and enhance the power of self-regulation.
  If you constantly look at what you have to give up, the very act of budgeting becomes distasteful. A mixture of long- and short-term gifts to yourself will help keep you motivated.
  When you've been faithful to your budget for a month, give yourself a reward. Even small ones such as a night out with friends, a concert, or a little extra cash for spending can help.
  Keep visual reminders of these rewards or the things you're saving up for. Start building associations in your brain that make sticking to your budget an enjoyable activity with happy results.
  Schedule a Periodic Budget Evaluation
  It's difficult to predict correctly how much money you'll need in every category of your budget. For instance, a new job may necessitate a wardrobe change and your existing clothing budget may not cut it. That's why it's important to conduct a regular check on how well your budget is working. It may need tweaking. This is to be expected. Just make sure that you always keep your long-term financial goals in the picture.
  Learn all you can about finances, money management, and how you can best invest in yourself. Talk to your financially savvy friends and seek out real-world tips and advice from people who are doing well with their money.
  The more you learn about handling money wisely and the rewards that can result from such an effort, the more concrete and acceptable the reasons for budgeting will be.
  8 Ways to Budget When You're Broke
  Budgeting is smart, but if you're suffering from mounting bills and a lack of funds, it may not be where your focus is. In such circumstances, consider some additional steps that you can take to gain control of your finances.
  1. Avoid Immediate Disaster
  Don't be afraid to request bill extensions or payment plans from creditors. Skipping or delaying payments only worsens your debt. And late fees ding your credit score.
  2. Prioritize Bills
  Go over all your bills to see what can and should be paid first, prioritize those that are late, and then set up a payment schedule based on your paydays.
  Call the bill companies to see how much you can pay now to get back on track toward a positive status. Explain that you are taking strict measures to catch up. Be forthright about the amount you can afford to pay now. Don't just promise to pay the full amount later.
  3. Ignore the 10% Savings Rule
  Stashing 10% of your income into your savings account is daunting or impossible when you're living paycheck to paycheck. It doesn't make sense to have $100 in a savings plan if you are fending off debt collectors. Your savings can wait until you can reclaim financial stability.
  4. Face Your Spending
  To fix your finances, you need to get a handle on your outlay first. Online banking and online budgeting software can help you categorize spending so you can make adjustments. Many people find that just by looking at aggregate figures for discretionary expenses, they are spurred to reduce excessive spending.
  5. Eliminate Unnecessary Expenses
  Hopefully, your budget has given you a sense of where your money goes. Now it's time to tighten up. Start cutting back on items that you wouldn't miss. Change habits that are costing you, like letting food spoil before you can eat it. Prepare meals at home instead of going to restaurants or getting takeout.
  You may be able to reduce some expenses that you shouldn't drop. For example, you might be able to lower your auto insurance premium by switching carriers.
  6. Negotiate Credit Card Interest Rates
  Those ultra-high interest rates on your credit cards aren't fixed in stone. Call the card company and ask for a reduction in the annual percentage rates (APR). If you have a good payment record, your request might be approved. This won't lower your outstanding balance, but it will keep it from mushrooming as fast.
  7. Track Your Spending
  Once you've gone through these steps, monitor your progress for a few months. You can do this by writing everything you spend in a notebook, with budgeting apps on your phone, or with the software you may already use for your budget.
  Ensure that every cent is accounted for. Fine-tune and adjust your spending as needed after each month. This not only can help get you out of financial trouble. It also can put the spotlight back on the importance of your budget.
  8. Seek New Income
  For the time being, saving and investing is out. But consider ways to increase your earnings: working overtime, getting a second job, or picking up some freelance work.
  How Do You Create a Budget?
  Creating a budget takes some work. You'll need to calculate every type of income you receive each month. Next, track your spending and tabulate all your monthly expenses, including your rent or mortgage, utility payments, debt, transportation costs, food, miscellaneous spending, and more. You may have to make some adjustments initially to stay within your budget. But once you've gone through the first few months, it should become easier to stick to it.
  What Is the 50-20-30 Budget Rule?
  The 50-20-30 budget rule was popularized by Sen. Elizabeth Warren (D-Mass.) in her book All Your Worth: The Ultimate Lifetime Money Plan. The plan entails dividing all of your after-tax income into 50% for your actual needs, 30% for anything you want, and 20% for savings.
  How Does Budgeting Help a Business?
  Just like budgets help people, corporate budgeting helps businesses stay on top of their finances. It also helps business leaders make very important investment decisions, manage and meet goals and objectives, and identify any financial hurdles that come their way.
  The Bottom Line
  A budget often conjures up images of complicated financial documents. But in reality, it's a money management tool that can be used by various entities, including governments, businesses, and individuals/households of every income level. Budgets can help prepare you to make better decisions about your money so that you can secure a brighter financial future.