What is Budget?

Image Credit: Flickr User Tax Credits, via CC

Haven’t you all heard your parents say from time to time that the toy or a dress that you really want is not in their budget? What exactly does it mean? Sometimes you hear grownups saying that the new budget for the country this new year has been decided by the government. What does it all mean? Here is the thing.

A budget very simply put is how much you earn and how much you spend. It is an estimate of income and expenses. For example, when a family sets up a monthly budget, it means they decide how much they will spend on what. So when parents say that a toy or a dress is not in their budget it means that they had not set aside so much money for buying that thing beforehand. And if for some reason they end up buying that it would just mean that something else, like your crayons, might get cut down from the list of things that can be bought.

While the budget of a family can be easily modified as it is simple, the budget of a country is set for the whole year and is really complex. The government officials, especially the finance minister work out an extremely complicated plan which lists how much money will be spent in each sector of the country – sectors mean things like hospitals, education/school, road development, agriculture etc. The finance minister has to be really careful to not neglect or give lesser money to a needy sector or give more money than required to some others. For example, if the government makes a financial plan such that it gives more money to the education sector but less to the upkeep of roads then the schools will benefit ( and might even get a little wasteful in their spending ) because the infrastructure of the roads might suffer.

So then, that is what the Budget is – a list that balances things you spend money on with how much you actually earn.

Now, money should never be wasted. It should be used for meaningful expenses. So next time you think about buying a doll while you already have fifty other dolls at home, think again! Wouldn’t it be better to buy a book that you don’t have instead of the doll? And since the book is perhaps going to be cheaper than the doll – that way you can stay within your budget, and so will your parents :)

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