Budget

The word comes from an old French word for a small leather purse, and a budget is still a set of purses: one per category, filled on payday from the month's income. The amounts are the plan; a budget adds them up against income before the month starts and compares each one with what was actually spent while it runs. The first test a budget faces is arithmetic, that the amounts add up to no more than the income, and it is passed or failed on the first of the month rather than the last. A category that then runs over is a number with a cause, not a verdict.

In a sentence

• "Our budget gives groceries $560 a month, and March came in $43 over it."
• "The budget adds up to $3,760 against $4,000 of take-home pay, so the plan leaves $240 before the month starts."
• "A budget says what each category may take; the bank balance only says what is left, and it still includes the rent."

How it works

A budget is built from take-home pay, the amount that actually lands in the account, and from lines of four kinds.

1. Enter the fixed bills at their exact amounts. They are not decisions.
2. Set the saving line next, so it is sized before the flexible categories are filled rather than from whatever they leave.
3. Give each flexible category an amount from three months of real spending, rounded to a figure you will remember.
4. Add everything up and subtract it from take-home pay. A positive result is the plan's room; a negative one means the plan spends more than arrives, and the flexible categories are where it closes.
5. Check each category's spent figure against its amount once a week, and at month end move one or two amounts toward what actually happened.

Room in the plan = take-home pay − the total of every amount

An example

The plan fit before the month started, with $240 of room. Groceries then ran $43 over and dining out $68 over, while utilities, gas, shopping and entertainment came in $85 under between them, so the month finished $26 over the plan and still $214 inside the income. The budget's contribution is that the $26 has an address: two rows, rather than a feeling about the balance.

Why it matters

Without a budget, "can we afford this" is answered by the checking balance, which is the wrong number: it reads as available on the 12th because the rent and the car payment have not gone out yet, and the same dollars get spent twice. A budget answers from a category's remaining amount instead, which already has the bills taken out. It also settles on the first of the month whether the plan fits inside the income at all; when it does not, the cut is a decision about a named category, and when a month ends over, the overage has a row and a cause, which is the difference between correcting a budget and abandoning one.

Budget versus cash flow

A budget is the plan for a month that has not happened; cash flow is the measurement of one that has. The budget says what each category may take and whether the plan fits the income; cash flow says whether the month as a whole came out ahead, which the category totals cannot, because a budget kept in every row can still add up to more than the income. Read cash flow first each month and the categories second. See Cash flow and Cash flow versus budget.

Common questions

Is a budget the same as tracking my spending? No. Tracking records what happened; a budget sets an amount first and compares what happened with it. Three months of tracked spending is the best source for the amounts, which is why tracking comes first.

What is a good budget? One whose amounts are true. Its total fits under take-home pay, a category that goes over does so by a few percent rather than by half, the weekly check takes fifteen minutes, and it is still being read in month three.

Do I have to budget every dollar? No. Assigning every dollar is zero-based budgeting, one method. A budget can put amounts on only the categories that run away and leave the bills as fixed lines, as long as the total is still set beside income.

How many categories should a budget have? Ten to fifteen, one for each spending decision you actually make. A list of forty gives forty small numbers too noisy to compare, and a single line for living expenses hides every decision inside it. See Which categories a budget should have.

Go deeper

• Which categories a budget should have sizes the list at one category per decision, with a list cut from 28 to 14.
• How to set budget amounts when you have no idea what you spend builds the first amounts from three months of history and trims one category at a time from month two.
• How to stick to a budget for more than two months puts the weekly check on the calendar and recalibrates once after month two.
• The Budget calculator splits your monthly take-home pay into needs, wants and savings with the 50/30/20 rule or shares of your own, and shows the dollar amount each bucket gets.

Where it shows up in Zypper

Zypper's budget is an amount per category, tracked one month at a time. You give each category a monthly amount, and the budget page shows Budgeted, Spent, and a bar showing your pace through the month, with a summary card, Spent this month, whose pill reads $X remaining or $X over. Left to budget, above the category list, is your expected income minus everything budgeted for spending, every amount standardized to a monthly figure; a negative figure means the plan spends more than you expect to earn. While you edit an amount, a History panel shows what you Spent last month and your Monthly average with a chart of the last four months, and a click uses either figure; Auto set proposes every amount from the last three months of your transaction history, shown before it is written. See Creating your budget and Tracking your spending pace for the details, or get started with Zypper to set your own amounts.