Have you ever been shopping with your parents and asked them to buy something special for you? Maybe even lots of things? You may have been told you couldn't have it right now, or maybe you only got some of the things you wanted. What do you do then?
Of course, one option is that you can save your money to buy something you didn't receive as a gift. To make a good financial decision and figure out how to get from where you are to where you want or need to be — financially — you'll need a plan.
We call such a financial roadmap or plan a budget. Basically, a budget is just a simple written plan for how to spend the money you earn.
Do you earn income? If you make money for doing chores or receive an allowance, that's income. The money you receive as a gift on your birthday? That's income, too.
You also have expenses. Expenses are the things you spend your money on. Expenses can be broken down into wants and needs. Needs are the things you need to survive, such as food, clothing, and shelter. Wants are things that might be nice to have but you don't need to survive.
It can sometimes be difficult to distinguish between wants and needs. How about eating out at your favorite restaurant? It's food, which you need to survive. But do you really need to eat out at that restaurant? A peanut butter and jelly sandwich would satisfy your need for food. Eating out is probably more of a want than a need.
Most kids' needs are satisfied by their parents. Those items on your wish list? Those are almost certainly all wants. After you meet all your needs, it's OK to spend some of your money on wants.
If you don't have enough money right now to buy something you want, you can set up a budget to help you reach your goal. First, you need to figure out your income. How much money do you have now and how much will come in over the next weeks and months?
Next you'll need to determine your expenses. What do you spend money on? Movie tickets? Snacks? New cleats? Video games? Write down all the things you spend your money on and figure out how much money — if any — you have left over.
If you make $10 per week and usually spend $8 per week, you'll be able to save $2 each week. If you are saving to buy a $60 video game, it'll take you 30 weeks to save enough money to buy the game you want.
Does 30 weeks sound like a long time? It probably does. You probably want the game now or, at most, in just a few weeks from now. If that's true, that's when a budget can really help you.
A budget shows you your income and expenses. To buy the game you want sooner, you'll need to increase income, decrease expenses, or do both.
To increase income, you could do additional chores or odd jobs for neighbors. For example, mowing a neighbor's lawn for $10 each week would double your income.
Decreasing expenses is often easier than increasing income, but it involves making difficult decisions. If you spend $5 each week on snacks with your friends, you could forgo those snacks and decrease your expenses greatly.
Of course, it's a tough decision to go without snacks with your friends. It's a decision you have to make for yourself. Which is more important: snacks with your friends or getting the game you want sooner?