# Balancing Your Budget

Part of the Personal Management Merit Badge Digital Resource Guide: [Introduction & Overview](https://merit-badge.university/merit-badges/personal-management/guide/index.md)

*2. Budgeting*

> **2b.** Compare expected income with expected expenses.
>
> 1. If expenses exceed budget income, determine steps to balance your budget.
> 2. If income exceeds budget expenses, state how you would use the excess money (new goal, savings).

### The Balancing Act

Now that you have built your 13-week budget in [Requirement 2a](https://merit-badge.university/merit-badges/personal-management/guide/req2a/), it is time to step back and look at the big picture. Add up your total expected income for all 13 weeks. Then add up your total expected expenses (including savings). How do the two numbers compare?

There are only three possible outcomes:

1. **Income > Expenses:** You have money left over. Great problem to have.
2. **Income = Expenses:** Perfectly balanced. Every dollar has a job.
3. **Income < Expenses:** You are planning to spend more than you earn. This needs fixing.

### When Expenses Exceed Income

If your expenses are higher than your income, your budget is "in the red." This is not unusual — many people (and many governments) create budgets that spend more than they earn. The difference is that you are going to fix it.

Here are practical strategies to bring your budget into balance:

**Cut expenses:**
- Identify your biggest "want" expenses — can any be reduced or eliminated?
- Look for cheaper alternatives (pack lunch instead of buying it, borrow books instead of buying them)
- Postpone non-urgent purchases to after your 13-week period

**Increase income:**
- Can you take on a small job like dog walking, lawn care, or tutoring?
- Do you have items you could sell (old games, clothes you have outgrown)?
- Could you negotiate a small increase in your allowance in exchange for extra chores?

> **Tip**
>
> Start by cutting expenses before trying to increase income. It is usually faster and easier to stop spending $5 a week on snacks than to earn an extra $5 a week. Every dollar you do not spend is a dollar you do not have to earn.

![A Scout looking at a notebook with two columns comparing income and expenses, using a pencil to make adjustments, with a balanced scale illustration in the margin](https://ik.imagekit.io/doulacoop/tr:w-800/mbu-assets/merit-badges/personal-management/guide/scout-balancing-budget?v=c4a94332)

### When Income Exceeds Expenses

If you have money left over after covering all your expenses and savings, congratulations — you are ahead of the game. But "extra" money without a plan tends to disappear. Decide now what you will do with the surplus.

Smart options for excess funds:

- **Boost your savings goal:** Add the extra to your savings from [Requirement 1b](https://merit-badge.university/merit-badges/personal-management/guide/req1b/)
- **Create an emergency fund:** Set aside money for unexpected expenses
- **Set a new goal:** Is there something else you have been wanting to save for?
- **Give:** Consider donating a portion to a cause you care about (you will explore this idea more in [Requirement 3](https://merit-badge.university/merit-badges/personal-management/guide/req3/))

> **Did You Know?**
>
> Warren Buffett, one of the world's most successful investors, started saving and investing when he was 11 years old. He bought his first stock at age 11 and filed his first tax return at 13. Starting young with even small amounts gives you a massive advantage because of compound interest — something you will learn about in [Requirement 4](https://merit-badge.university/merit-badges/personal-management/guide/req4/).

### Presenting Your Analysis

When you discuss this with your counselor, show your work clearly:

**Budget Balance Summary** — What your counselor will want to see

- [ ] Total expected income: The sum across all 13 weeks
- [ ] Total expected expenses: Including planned savings
- [ ] The difference: Income minus expenses
- [ ] Your plan: Steps to balance (if negative) or how you will use excess (if positive)
- [ ] Specific changes: If you adjusted your budget, show what you changed and why

> **Be Prepared! What If Your Budget Will Not Balance?**
>
> Sometimes, no matter how you adjust, your expenses are simply higher than your income. This happens in real life too. If you find yourself in this situation:
> - **Be honest about it.** Your counselor is not grading you on whether your budget balances perfectly — they want to see that you understand the problem and have thought about solutions.
> - **Show what you tried.** Document the cuts and adjustments you considered.
> - **Think long-term.** Maybe your 13-week budget cannot balance, but you can show how it might balance over 26 weeks with different income sources.

[Consumer Financial Protection Bureau — Spending Tracker](https://www.consumerfinance.gov/consumer-tools/spending-tracker/): A free tool from the U.S. government to help track spending and identify areas where you can cut back.

---

- Previous: [Building a Budget](https://merit-badge.university/merit-badges/personal-management/guide/req2a/index.md)
- Next: [Tracking Your Money](https://merit-badge.university/merit-badges/personal-management/guide/req2c/index.md)