Now let’s take a closer look at the expenses in my budget. There are three different types of expenses, and understanding each of them can help you decide what’s important as you watch your budget.
Alex’s 4-week budget
|Description||Income (+)||Expenses (-)||$ Available|
|Earnings — babysitting and running errands||$80.00||$80.00|
|Savings for a computer||$15.00||$30.00|
|Entertainment / clothes||$20.00||$10.00|
The first kind of expense is a fixed expense. These are expenses you can’t really control because they’re necessary. Adults usually have fixed expenses — like rent or car payments. They occur regularly and don’t change from month to month. Fixed expenses:
The second kind of expense is called a flexible expense. Like fixed expenses, flexible expenses occur regularly, and they’re expenses that you can’t really get around. Flexible expenses:
The difference is that with flexible expenses, you have some control over how much you spend. Adults, for example, have to spend money on electricity or groceries, but can make choices over how much they spend.
The third kind of expense is called a discretionary expense. This is money that you choose to spend — like money for movies or having pizza with friends — or even money that you save. So far, all of my expenses are discretionary, but I try to think of my college fund as a fixed expense. Discretionary expenses:
Remember, your budget is a general plan. If your expenses change, or if you have an emergency expense, your budget will have to change too. So try to allow yourself a few dollars left over every month for pocket change — or to help pay for the unexpected.
So that’s just a little glimpse of my budget. When we get older and live on our own, there’ll be so much more to budget for and keep track of. That’s when a budget requires even more planning. Come on! Let’s take a look!
Click the Next button to learn about a budget for a family of four.