Budgeting 101: From Getting Out of Debt and Tracking Expenses to Setting Financial Goals and Building Your Savings, Your Essential Guide to Budgeting by Michele Cagan

Chapter 1
Budgeting Basics
Most people have the wrong idea about budgets. They
think they’re all about eating no-brand ramen noodles in
the dark to save money and keeping endlessly detailed
records of every penny spent. The real point of a budget is
to make sure you’re never in a position where ramen
noodles are all you can afford to eat or you’re praying your
power doesn’t get shut off because you couldn’t pay the
bill.
In this chapter, we’ll expose budgeting myths, take a look
at budget reality, and reveal the best way to make this
personalized money plan work for you. With this powerful
tool, you’ll be able to build wealth, meet and exceed your
goals, and be ready whenever unexpected financial
setbacks occur.
WHAT BUDGETING IS (AND
ISN’T)
A Money Plan . . . Not a Magic Potion
The right budget is a game plan for your money that
assigns specific jobs to every dollar, whether that job is to
pay the electric bill, buy this week’s groceries, or beef up
your 401(k) account. That plan helps you direct cash
toward your financial goals, from paying cash for your next
car to funding a destination wedding to enjoying a stressfree

retirement. A budget lets you decide ahead of time
what you want to do with your money instead of spending
randomly in ways that undermine your plans and leave you
with a mountain of debt.
What budgeting won’t do is magically and instantly solve
all of your money problems. It’s not a quick fix or a perfect
formula. But with time and focus it can move you out of a
monthly money crunch and toward financial freedom and
prosperity.
A Small Leather Bag
The word budget comes to us from fifteenth-century France, where a bougette
was a little leather bag or pouch that was used to carry money (sort of like a
wallet). After a hundred years or so, the word morphed into budget and began to
refer to the money inside the pouch.
Bottom line: a budget tailored to your life—as opposed to
your life tailored to a budget—can help you spend

Budgeting 101: From Getting Out of Debt and Tracking Expenses to Setting Financial Goals and Building Your Savings, Your Essential Guide to Budgeting by Michele Cagan