Budget is a versatile word that refers to money and how much of it you have total. When we say we are trying to keep within a budget, we mean that we are trying to stay within a well-defined monetary limit. That limit is set by an individual (or a company) and, depending on their situation, can be very broad or narrow.
Regardless of how much money someone makes, everyone has a budget. Setting a budget for a company is an entirely different matter, so let’s focus on how a budget can help the individual.
A budget takes into account how much money is flowing in (income) and how much goes out (expenditure). If your expenditure is greater than your income, you are losing money. Consequently, if your income is greater than how much you spend, you have a little bit extra.
An important fact that many people fail to realize is that if you continue spending frivolously and without care, you will never save enough money to be comfortable.
Obviously, we all need to spend money on something. We can’t just cut out paying rent or buying groceries because those are necessary for us to continue living. What you need to do when budgeting is taking into account those things you need to pay for (rent, groceries, gas), and those things that you can potentially cut out of your expenditures.
One way you can save money and still pay for the things you need is to look for a cheaper alternative. Buying brand name products can be pricey, and oftentimes the generic form is the exact same thing at a more reasonable price. Once you sit down and figure out where your money tends to go, you can find ways of keeping more of it and developing money-saving strategies that are tailored for your needs.