What is a Budget?

Updated: May 18



Many people genuinely underestimate the benefits of a budget. I didn't value having a financial plan through college. It wasn't until I landed my first real job as a schoolteacher that I could truly see the benefits of prioritizing my money.

I started my financial journey lacking knowledge about how to budget my money. I didn't even know what budgeting really meant. I grew up with a very small money mindset. Basically, I just wanted to own a big house, make a lot of money, and live happily ever after. Sound familiar? Find yourself needing a plan for your money? Are you trying to figure out how to pay all of your bills or create savings for your future?


Where did I started before I began budgeting?

At 18 years old, I walked on campus with limited information about the importance of having a financial plan. I just knew where I wanted to attend and how much it cost. So, I unknowingly signed my name on the dotted line for five separate loans to attend the first semester of college. Check out how to budget your way through college post for more advice on how to handle your finances in college. (Trust me …)

Yikes, my student loans became a big reason for needing to create a budget.

Every semester I applied for student loans. Every semester, I accepted whatever the amount my institution gave to me. Honestly, I thought the higher the amount, the better off I was going to be that semester. I believed the more money I received, the better off I would be in college. I could not have been more misinformed. Those refund checks felt terrific to receive in the mail. However, they played a significant role in my overall debt balance when I graduated.



I accumulated $50,000 worth of debt after undergrad.



Upon senior year, I graduated with a total of $50,000 of student loan debt. That was never my intention. Who wants to graduate with any debt? Honestly, I was just concerned with attending the college of dreams, getting an education, and enjoying my four years of undergrad. The amount of money I owed the institution didn't cross my mind too much. I became dependent upon the student loans to pay my way through college. It was so easy. All I had to do was apply, accept, and sign. In return, I would get to attend college "worry-free" and bank on a couple thousand dollars to see me through the semester.

Working to pay the bills


Don't get me wrong. I worked, attended college, and joined organizations. I always had that go-getter attitude. Like I said, being an independent woman was still a goal of mine. Honestly, I didn't have a financial situation back home to support me. So, I had to step up and learn how to provide for myself financially, attend college, make good grades, and reach my goals all at the same time.


So, I guess this time in my life was the beginning of learning the importance of self-discipline and knowledge. You might be wondering what in the world do those two things have anything to do with budgeting.

Well, discipline and knowledge have EVERYTHING to do with it!


How to learn to Budget Your Money

I had to LEARN how to budget my money. I had no idea it would be so hard to discipline yourself and prioritize bills on a low income. At the time, I was only making about $7.00/hr and working 20 plus hours each week. My hourly wages and refund check seemed like plenty of money to get me through each semester. Regardless, I needed to know how to budget any money that was coming in.

I believe this part of my life encouraged me to learn to work with the income I had coming in. It was not always easy. Sometimes, I had to grab extra shifts at work to pay my phone bill and rent. However, I learned to live an affordable life. Living on campus and becoming a resident assistant (RA) helped me afford my rent. These decisions were the beginning stages of me learning how to budget my money. More about how to budget here.

What is a budget? What is a budget mean anyways? I broke the dictionary's definition down in a way that would work best for me.


The definition of budgeting means...

making a plan with your money.

Simple enough right? I realized I might have misunderstood the actual meaning of budgeting growing up. For some reason, whenever I would hear the word budget, I would cringe. The word felt more like a "have to" than an "I want to." Budgeting money sounded like I would have to make all these sacrifices and miss out on all of the "things" I really "wanted" in life. When I learned the true meaning of a budget, I learned that creating a plan for my money was the most life-changing decision I would ever make.


Why do you need to know the definition of a budget?

Well, if you don't know the correct definition of budget, how can you accurately create a budget? It is essential to understand basic terminology. That way, you will be able to build your finances, a working budget, and see your money grow over time. As a result, you will develop a more accurate understanding of your finances. Then, you can build a financial legacy for your future that lasts beyond yourself!

"I learned there is so much power in gaining knowledge about my own finances. That was the only way I was ever going to see any real change."

It is vital to make sure you have the correct definition of these words. Sometimes, a person can think they know the actual meaning of a term used every day. In actuality, they may have a slight misinterpretation that could affect their overall perspective of handling money. As a result, that may cause someone to misuse their money, make poor money management decisions, or miss out on financial opportunities that could help them gain financial independence down the road.

Understanding key terms can positively influence your financial outcome!

Every person needs a budget. It doesn't matter if you make $10,000 a year or $1,000,000,00 a month. You need a budget!


Start with your income. Your #income is the amount of money you make in a day, week, or month. Depending on your job, your income could be hourly, fixed, variable, or based on your annual salary. You need to know how much money you are bringing in each month. Then, you can start to create. a plan on where you need to allocate your money.


Fixed Income

Fixed income is the amount of mine you make from week to week. It is a set amount of money that you make from your job. Some jobs pay a fixed amount weekly.

Variable Income

Variable income is the amount of money a person makes, but the amount changes. Many contractors and project-based workers experience inconsistency with their income.


Allocate Your Money

Allocating your money is when you distribute your money to a particular area like rent, groceries, entertainment, etc. Hourly income is when you are paid by the hour. For every hour you are present at work you get paid a certain amount. If you are unsure of your hourly rate make sure to check with your manager to gain knowledge about your compensation.


Start Your Budget

Now, you are aware of your monthly income, you are ready to distribute those funds to the correct areas using a spreadsheet and the cash envelope system. I created a budget spreadsheet for you and a cash envelope system to help you get started with allocating your spreadsheet. Just sign up below and a FREE copy will be sent straight to your inbox.



These simple steps will help you start budgeting. Once you begin budgeting, you will be able to see the benefits of allocating your money each month. Grab The 21 Day Budget to help you begin your journey, organize your finances, and begin decreasing your debt so you can eventually start saving!





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