Chapter 2: Budgeting Basics
Think of your income as the money flowing into your pocket — it’s what you earn from your job, freelancing gigs, side hustles, birthday money, tax refunds, or any other source. Basically, it’s every dollar (or pound, or loonie) that ends up in your bank account or even your piggy bank. It’s easy to think of income as just your paycheck, but you might be surprised by how many little streams of money flow in over the course of a month.
When you’re tracking your income, it’s important to count everything. That includes regular earnings like your salary, as well as irregular ones like bonuses, commission, tips, or that $20 your friend finally paid you back for concert tickets. If you have inconsistent income (like freelance or seasonal work), tracking becomes even more important because it helps you spot patterns and prepare for leaner months.
On the flip side, we have expenses — all the money flowing out of your pocket. This is everything from rent or mortgage payments, groceries, and utilities to Friday night takeout, that Spotify subscription you can’t live without, or the impulse buy you didn’t plan for. Some expenses are fixed (like your rent), others are variable (like your grocery bill), and some are completely optional. The point right now isn’t to judge or change anything — it’s just to get the full picture.
Now, here’s the fun (and eye-opening) part — tracking them! Why is tracking your income and expenses so important? Well, picture this: you’re cruising down a highway with no GPS, no map, and no clue where you’re headed. You might enjoy the ride for a bit, but eventually, you’ll wonder where you are and whether you’re anywhere close to your destination. That’s what it’s like navigating your finances without tracking them.
Tracking gives you the lay of the land. It shows you exactly where your money is coming from, where it’s going, and whether it’s helping you reach your goals or slowing you down. It helps you spot patterns — maybe you’re spending more on eating out than you thought, or maybe your side hustle is bringing in more income than you realized. It also helps you identify opportunities to save or invest, and it can even highlight when you’re living beyond your means before it becomes a bigger problem.
The first time you do this, you’ll want to go into as much detail as possible. Write down every source of income and every expense for at least one month, ideally three, so you can see an accurate average. Once you’ve created your first budget from this information, you can scale back how often and how deeply you track, but the upfront effort will pay off in clarity and confidence.
In the next section, we’re going to walk you through an exercise to create your first budget using this information. Once you have that budget in place, you’ll feel like you’ve just turned on the GPS for your financial journey — and that’s when you can really start steering toward your goals.
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