Say you get $10 for your allowance. A budget is deciding before you spend it: $5 for toys, $3 for snacks, and $2 goes into your piggy bank. It’s a plan for your money so you don’t run out.
That’s really all a budget is — a plan for where your money goes. Instead of spending it randomly and wondering where it all went, you decide ahead of time.
Why Do You Need One?
Without a budget, money has a funny way of disappearing. You buy a coffee here, a subscription there, eat out a few times, and suddenly your paycheck is gone. A budget helps you:
- Know where your money goes — No more wondering
- Make sure the important stuff gets paid — Rent, food, bills
- Save for things you want — A vacation, a new phone, an emergency fund
- Avoid debt — Spending less than you earn is the golden rule
The Simplest Budget: 50/30/20
If you want an easy starting point, try the 50/30/20 rule:
- 50% for needs — Rent, groceries, utilities, insurance
- 30% for wants — Eating out, entertainment, hobbies
- 20% for savings — Emergency fund, retirement, paying off debt
The Bottom Line
A budget is just telling your money where to go instead of wondering where it went. Start simple, and adjust as you go.