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Budgeting on a Tight Income

After overspending in his first month of salary, Rahul sits down with a friend to plan a proper monthly budget.

Rahul, Friend

Key words and phrases

monthly budgeta plan for how much money to spend and save each monthHe made a monthly budget to control his spending.
fixed expensesregular costs that stay the same each month, like rentRent and phone bills are his main fixed expenses.
variable expensescosts that change from month to month, like food or travelHis variable expenses went up because he ate out often.
savings goala target amount of money someone plans to saveHe set a savings goal of ten percent of his salary.
essentialsthings that are necessary, like food and housingHe made sure to budget for essentials first.
discretionary spendingmoney spent on things that aren't essential, like entertainmentHe cut back on discretionary spending like movies.
emergency fundmoney saved for unexpected expensesHe started building an emergency fund for medical costs.
overspendto spend more money than planned or than you haveHe tended to overspend in the first week of the month.
cut backto reduce the amount spent on somethingHe decided to cut back on eating out.
cash flowthe movement of money coming in and going outTracking his cash flow helped him plan better.
expense trackera tool or app used to record daily spendingHe downloaded an expense tracker to log every purchase.
disposable incomemoney left over after paying for essentialsHis disposable income was smaller than he expected.
prioritizeto decide what is most important and deal with it firstHe learned to prioritize rent and savings over shopping.
live within your meansto spend only as much money as you actually haveHe's trying hard to live within his means this year.
splurgeto spend a lot of money on something, often as a treatHe allowed himself one small splurge each month.
budget deficitwhen spending is more than the income for that periodHe ended the month with a small budget deficit.
recurring expensea cost that repeats regularly, like a subscriptionHe forgot about a small recurring expense for an app.
financial disciplinethe habit of managing money carefully and consistentlyIt takes financial discipline to save every month.
save upto gradually collect money for a future purposeHe's saving up for a new phone.
stick to a planto follow a plan consistently without deviatingIt's hard to stick to a plan during festival season.

Useful sentences

Dialogue

FriendYou look stressed. Is everything okay?

RahulNot really — I overspent again and barely have money left this month.

FriendHave you tried making a monthly budget?

RahulNot properly. I don't even separate fixed expenses from variable ones.

FriendThat's a good place to start. Then set a small savings goal.

RahulI think my discretionary spending is the real problem.

FriendTry using an expense tracker — it really helps you see where the money goes.

RahulShould I cut back completely on eating out?

FriendNot completely — just allow yourself one small splurge a month.

RahulThat sounds manageable. I'll start tracking from tomorrow.

Common mistakes

Quick quiz

1. What are "fixed expenses"?

2. What does "overspend" mean?

3. What is "disposable income"?

4. What does "live within your means" mean?

5. What is a "budget deficit"?

6. Complete: "He allowed himself one small ___ each month."

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