Budgeting — FinTeen

What it means

The Cambridge dictionary definition of budgeting is "Budgeting is the process of calculating how much money you must earn or save during a particular period of time, and of planning how you will spend it."

Why it matters

Budgeting matters because it gives you a way to plan your money to not struggle with overspending and the stress it creates. The way you budget helps you to cover your needs and save up without going in debt.

How to use it

A really common budgeting method is the 50/30/20 method. 50% of the money goes to needs, 30% to wants, and 20% to savings.

Real-Life Example

If you have a €1000 and spend it all on a brand new phone, you will not have money for your other needs. But when you spend 50% of the €1000 for your needs, 30% for the things you want within the budget, and 20% saving for the phone; by 5 months you will save €1000 without stressing for your needs or being in debt for the phone.

Did You Know?

Michael Carrol, a binman in UK has bought a £1 lottery ticket in 2002. He eventually hit the jackpot winning him £10 million. Although after wrongly budgeting and spending his money on expensive cars, houses and illegal substances, he ran out of the money in only 8 years. Returning back to his old job.

Key Takeaways

Budgeting is important for a stress and debt free spending habit.

If you would like to buy something, check your income, plan your spendings and save up for the item.

Next lesson