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Managing my money
Managing my money

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3.1.1 Budgeting – the basics

For most people there’s considerable pressure to spend money on goods and services, yet we all need to avoid debt, to save and to invest for the future. The process of budgeting can help to reconcile competing demands on income. A budget identifies and adjusts income and expenditure flows. It looks forward, to estimate and plan income and expenditure over a future time period.

So how does setting a budget help you manage your household finances?

  • It helps you control spending by comparing your income with your spending.
  • It helps you check that you have enough spare income to pay current and future bills without having to borrow.
  • It enables you to plan on how to meet your goals.

Carrying out a budgeting exercise once is useful to help you to assess whether your spending is under control, but budgeting is most effective in managing finances when you use it as part of an ongoing process.

Next, you see how an income and expenditure profile sheds light on the financial circumstances of a young woman called Jenny.

Figure 1