To be frugal is to know how to live on a budget (verb) and to live on a budget we need to know what a budget (noun) is. The word budget is often said to come from the Latin word bulga meaning little pouch or knapsack. But there is so much more to the word. The definition of a budget is an estimate of income and expenditures for a set period of time. According to David Ramsey, an expert of finance, a budget basically is a plan for your money or telling your money what to do. Now the first budget was presented in India on April 7, 1860 by the East India Trading Company to the British Crown by James Wilson. This brought clarity to British Crown on the finances that were going on.
Now these are some reasons to have a budget. The first reason is to understand the nature of money and where it is going. Money is a very complex subject to understand. To some money means the sum of cash you have in your pocket or the amount of money in your bank account. Money could also represent credit, the ability to buy a house on mortgage, or the ability to obtain merchandise with a credit card and knowing that one can understand that money can be like a wild animal without direction or instruction. A budget can be compared, figuratively, to a leash on that animal to control it. Without a budget money has the capacity to overrun and control your life.
The second reason to have a budget is to specifically find out what a need is and what a want is. Needs are defined as goods or services that are required to live. This includes the need for food, clothes, shelter, and health care. Wants are defined as goods and services that are not necessary, but they are what we crave or wish, for example, a television, designer clothing, or the newest version of the iPhone. Most Americans have these two words confused, but a budget helps the process of figuring out the difference between the two.