What is a budget ?

Hi!! It’s been a long time that we met. Isn’t it? My friends and I are planning a vacation to a beach resort. Because of the recurring lockdowns we all were unable to meet like before. It has been almost a year and a half that we met. Now that we are planning to meet, we want to spend quality time together and make the best of it. One of my friends found this beach resort and he asked me to prepare a budget to plan the trip. I was stumped! Budget?? I had never heard of it. Of course, my parents would always discuss something like making a budget but I never deep-dived in the discussion.

So I decided to get an understanding from my dad and now I am all set to make a robust budget for the best trip ever with my friends. Oh yes!! Nosy would be here in sometime. He said he would give me some company while I make the budget. He also wanted to learn and understand what a budget is. So, here we go!! Let’s understand what a budget is and make one more addition to our “Money Matters” knowledge bank.


Storyyogi

Hi Nosy!! How are you? It’s been a long time since we met. Hope you are fit and fine.


Mr. Nosy Mice

Hi buddy, I am good. Heard you are planning a trip to the beach resort and you have been asked to make a budget for the trip. I really want to learn more about budget from you. Usually it is me who teaches you, this time I will be glad to learn it from you.


Storyyogi

Sure Nosy, why not? My dad gave a wonderful and easy explanation of the term budget and I am glad I can teach you too.


Mr. Nosy Mice

Wow!! So tell me what is this budget all about?


Storyyogi

A budget is an estimation or a rough calculation of the money earned and money spent in a given period of time. Like for e.g. If you plan a trip to an amusement park with your friends you will need a budget i.e. a clear understanding of the money that you have in hand to an estimated or a rough calculation of expenses encountered right from travelling to the park to enjoying there and returning back home. This rough estimation is called a budget?


Mr. Nosy Mice

Oh so you mean, this is the calculation that you are planning to prepare for your trip, right? But tell me something, why is making a budget necessary? I mean we are aware about the rough expense figure. Then why do we waste time in making a budget.


Storyyogi

No Nosy. It is not at all a waste of time. A budget helps you to be prepared for the expenses encountered i.e. helps you determine the cash to be carried or be prepared with your card limits for digital payments. There can be some unforeseen or unplanned expenses too. Not only that, it helps you save. Yes!! A robust budget in place definitely helps you save. The surplus money that is in hand or bank account is your saving!! Is it not a fun fact? Now do you think it is a waste of time?


Mr. Nosy Mice

Okay, Okay! You are right I completely ignored that a good budget will lead to savings too. In that case, my friend, it is definitely not a waste of time. But you would need a budget for a specific period of time like a daily, weekly or yearly. Is it not?


Storyyogi

No, no, nothing like that. A budget can be daily, weekly, monthly, quarterly or even yearly. If you wish to achieve a long term saving, your monthly or quarterly budget can be of great help to you. The period of budget is solely the choice of an individual or of a group of individuals or a family or a company.


Mr. Nosy Mice

 Wait a minute, you said long term benefits. How do you explain that?


Storyyogi

 Sure, let me cite an example to explain how budget helps in long term savings. For e.g. you are eager to learn a logistics course from a specific university, for which you will be eligible only after two years. You wish to help your parents with the fees. This is where the budget comes of great help. You can make a structured calculation of expenses and money in hand or your current allotted pocket money and follow the budget. With this you will always have some savings in hand and that can be used for paying the fees of your course. 


Mr. Nosy Mice

 Aha…. That’s good. This is amazing. I never thought about this too. But I don’t think elders need any budget. They have lots of money. Why should they devise a budget?


Storyyogi

No, no, Nosy, you are wrong. Who says so? In fact they are the ones who need the budget the most. For them the household budget or personal budget i.e. the total earnings of the parents and the expenditures of running the household like , school/ college fees, electricity bills, monthly maintenance of the house, car expenses, groceries etc. needs to be listed in the budget. This helps them to keep a track of unnecessary expenses or curtailing (wasteful spending) and increasing the savings. This helps them to plan their future as elders and even for their betterment. Because of the budget many households or families have averted many financial crises. 


Mr. Nosy Mice

Wow, you surely gave an elaborate and a very simple explanation of the budget. But yesterday, I heard in the news that very soon the government is going to present a budget. What is a government budget?


Storyyogi

A national or government budget is a document prepared by the government officials and/or a political entity presenting its estimated tax incomes and proposed spending/expenditure for the coming financial year for the nation. Like all this while we understood what is household budget, this is at the larger level, on a national level. Financial year is not like the calendar year i.e. it starts on 1st April and ends on 31st March of the next year. Calendar year begins from 1st January and ends on 31st December of the same year. In most parliamentary systems or governments the budget is presented to all the present political parties of the country in the the legislature and is implemented with approval and consent obtained from all.


Mr. Nosy Mice

Oh I see ! Thanks my dear friend for giving me such a wonderful understanding on a vast subject like budget. Enjoy your trip to the beach resort, do post your pictures. Have a great time. See ya. That reminds me. I want to buy myself a new phone for which I need to prepare a budget from today itself.


Storyyogi

Oh! All the best to you Nosy. Here I am almost ready with my budget, will have to catch up with my friends and show them too . I have to get going. And yes ! will post my pics on my social handlers . See you soon!! Bye!  


Mr. Nosy Mice

Great !! looking forward to see them . See you bye!! Safe travels!!

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