So let's get a little more academic and
formal now about how we want to think about the budgeting process.
Here's the basic model you want to build everything from.
Money in, money out.
And in the middle we have a sector representing our various cash reserves,
savings and investing accounts.
Now, here's the essence of the model.
To make a good plan you have to account for all your money flowing in and
flowing out.
This will affect what you do with the money or
discretionary funds you have in the middle that you can control.
So, let's start in our model with Money In.
At this point in your life, your money in column is likely to be pretty simple.
It may be your pay check from work.
May be an allowance from your parent if you're still in school.
Maybe a little extra cash on the side if you make money through a hobby, like I do.
I have a part time gig as a professional sand sculptor.
Building sand castles for things like weddings and corporate events.
As for other possible money in-flows, as you acquire capital and
invest it to put that money to work, your Money In column should expand
to also include the gains from the investments you've made.