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Making a Budget

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• Part 2: Large Companies • Part 3: One Last Thing

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Part 1: Budget Basics

One thing that every good money manager does is make a budget.

What is a budget? It's a means of keeping track of exactly how much money is coming in and exactly how much money is going out. If you own a company or you get an allowance, you want to know how much money you have at any given time. You don't want to run out of money, so you won't have any when you really need it. You also don't want to assume that you don't have any money when you really do have more than enough to pay for something.

So, people make budgets.

The most common way to make a budget is to write down (or use a computer to record) every single expense and every single income. Here is an example:

Mai-Ling's Babysitting Service

Date	Expenses	Income
6-13		$20
6-20		$20
6-27	Gasoline $20

So at the end of June, Mai-Ling has spent $20 but earned $40. She has $20 left over.

Now, this amount of money is relatively small. Mai-Ling can easily count just how much money she is spending and taking in, so she can easily know that she has that $20 left over.

But what about a large company, which has hundreds of expenses and many sources of income each month? That company especially needs to keep track of its money, going out and coming in, so the company can pay its bills. (Sometimes, the money can seem like it has to cover a lot of expenses. Some people call this stretching the money, because it seems like the expenses just keep piling up and the money doesn't seem like it is ever enough.)

Next page > Large Companies > Page 1, 2, 3