13: Preparing a Budget Animation Video
Transcript:
Preparing a Budget
To avoid spending too much money on food, you should establish a budget. A budget is a plan for managing income and expenses. Budgets are usually created for a one-month timeframe. Budgets can be created using an app, a spreadsheet, or with a pencil, paper, and calculator.
The first step when preparing a budget is to determine how much income you receive on a monthly basis. Income includes any money you receive from wages, gifts, tips, interest on bank accounts, or assistance, such as student grants or SNAP (Supplemental Nutrition Assistance Program).
Next, list your monthly fixed expenses. Fixed expenses are set amounts that you must pay each month for items, such as rent, car payments, insurance, and savings.
Then, list your estimated monthly flexible expenses. Flexible expenses are flexible amounts that you spend each month for items, such as food, clothing, utilities, healthcare, gasoline, entertainment, gifts and contributions, and other miscellaneous items.
Add together all your expenses—both fixed and flexible—to learn your total expenses. If your income is equal to or greater than your expenses, you are able to provide for your needs and meet your financial obligations. If your income is less than your expenses, you will not be able to meet all your needs and financial obligations and the bottom line will be negative.
You will need to find ways to reduce your expenses. Most fixed expenses cannot be changed unless, for example, you sell your car or add a roommate. Therefore, you should look for ways to reduce your flexible expenses first.
In this example, you could consider cutting back on eating out and save $10 per month. Then, you could eliminate your weekly trips to the movie theater and save $40. These changes will reduce your total expenses by $50 and your budget will be balanced again.