A budget is a detailed accounting of income and expenses during a given period of time, usually by month. Budgets help us track how much money we spend and compare it to how much money we have coming in.

It’s as simple as: Income – Expenses

Which budget type is right for you?

The answer is, it depends! Are you trying to plan for the future, or are you trying to figure out where your money actually went? Ideally, you will use both budgets together for the greatest success.

There Are Two Types Of Budgets

Projected Budget Actual Budget
Picture of the future based on estimated income and expenses – what you THINK you’ll spend.

This budget creates a baseline for future planning but needs to be updated as your financial picture changes.

Based on actual income and expenses for a set time period – what you ACTUALLY spent.

This budget provides a look backwards and needs to be updated and tracked to be of the most use.

Use this budget when:

  • You are goal planning or figuring out how much income you need to cover your expenses.
  • When income amount changes or you need to add a new expense to your budget.
Use this budget when:

  • Monthly to ensure you are spending in the amounts and places you think.
  • Identify any spending habits that may not be helping you meet your goals.

6 Steps to Budgeting Success

  1. Set a projected budget.
  2. Track your income and spending.
  3. Complete an actual budget at the end of the month.
  4. Compare to your Projected budget.
  5. Make necessary adjustments to income and spending moving forward.
  6. To take it a step further, complete a Bill Calendar.