Intro to Budgeting
TL;DR
Spend less money than you make. Ideally a lot less. Budgeting helps you keep track of:
- The money you make AND
- The money you spend.
Bob
Meet Bob. Bob isn't informed about personal finance and always makes the wrong decisions. Bob always gets fucked. Don't be Bob.
Bob and Budgeting
Bob earns $4000 a month. Bob is self-employed. Bob's job is to test mosquito repellent the hard way (think about it).
Bob spends his money on dinners out and on rent for his apartment in San Francisco. Bob doesn't spend any more money than he has. He spends exactly $4000 a month.
Bob gets fucked. Bob has to pay for health insurance. Bob is self-employed, so he forgets to take taxes out of his budget. Bob doesn't save. Bob can't find work for a month, has medical problems and ends up dead at 30 on his friend's couch with mcdonald's grease in the shape of mickey mouse on his tank top.
Don't be Bob.
When do I make a budget?
You usually make budget when you start a new job, or when you want to figure out how long you have until your money runs out.
For example, Shandra just quit her job. Shandra has $20,000 in the bank and her budget says she spends about $10,000 every year. Shandra knows she can live for about two years (2 * $10,000 = $20,000) before she has to start making money again.
The lessons
- Make a budget (the project will have examples)
- Remember to include the money you pay for taxes and savings.
- Keep track of all the expenses that you get every month.
Move on
That's it. Move on to the main project. We'll go into more depth soon.