In our everyday lives, we deal with money matters. Whether it is earning, spending, or saving. Two essential concepts are income and expenses. Understanding the difference between income and expense is fundamental for your financial well-being.
Income
Income is the money you earn. You get this money (typically) regularly either weekly, bi-weekly, or monthly depending on your employer. Or if you aren’t earning, then you can see your allowance from your parents as your ‘income’.
Expense
Expense is the money you spend or pay out to cover various bills.
The difference
Income adds to your wallet and expenses take money out of it. If your expenses exceed your income consistently, it can lead to financial strain and difficulties in saving for the future.
The importance of budgeting
To keep your finances in check and to make sure that you do not spend more than you earn, you should set a budget. It will act as your financial guideline. You can divide your income into specific categories like bills, going out, saving, etc. By setting a budget, you can track your spending and see where you spend the most money. It can help you to identify where you might need to cut back on (like buying takeout often). Setting a budget can also help you reach your financial goals!