What Is a Budget?
A budget is a plan for your money. Before you spend anything, you decide ahead of time how much you'll spend, save, and give — based on how much money you actually have coming in.
Think of a budget like a roadmap for your money. Without one, it's easy to spend without really thinking about it, and then be surprised when you don't have enough left for something you really wanted. With a budget, you're in control instead of just hoping it works out.
Income vs. Expenses
Every budget is built from two basic pieces:
💰 Income
Money that comes IN — money you receive. Allowance, birthday money, and money you earn doing chores or a job are all income.
🛍️ Expenses
Money that goes OUT — money you spend. A snack, a video game, or a gift for a friend are all expenses.
A good budget keeps track of both, so you always know how much is coming in and how much is going out.
Does Your Budget Balance?
Once you know your income and expenses, you can figure out how your budget is doing. There are three possibilities:
Income and expenses are exactly equal. Every dollar has a job.
Income is more than expenses. You have money left over!
Expenses are more than income. You're spending more than you're bringing in.
Say you get $20 in allowance this month — that's your income. You spend $8 on a game and $7 on snacks — that's $15 in expenses.
$20 income − $15 expenses = $5 left over. That's a surplus of $5 — money you get to decide what to do with next!
A deficit is the one to watch out for — the only way to cover spending more than you have is to borrow money, and borrowing usually costs extra, in the form of interest. A balanced budget or a surplus means you're in control.
Activity: Income or Expense?
Read each example, then decide whether it's money coming in or money going out.
Activity: Does the Budget Balance?
Add up the income and expenses, then decide: balanced, surplus, or deficit?