Budgeting Basics

Why budgets matter

Without a budget, money tends to disappear into whichever expense has the loudest voice that month — a dinner out here, a subscription there, a car repair, a gift. None of it feels unreasonable in the moment. At the end of the year, nothing is left. A budget makes that pattern visible so you can interrupt it.

Budgets also make it possible to answer the question "can I afford this?" with something better than a gut feel. If your budget allocates $400 a month to discretionary spending and you've used $380, the answer this month is probably no.

The four categories

Every budget, no matter how simple or elaborate, boils down to four buckets:

• Income — wages, self-employment, investment income, any inflows.
• Fixed expenses — rent or mortgage, insurance premiums, loan payments, subscriptions. These don't change month to month.
• Variable expenses — groceries, gas, utilities, entertainment. These fluctuate but you have some control over them.
• Savings and investing — retirement contributions, emergency fund, goal-specific savings.

A healthy budget saves first (before discretionary spending), covers fixed obligations, and leaves a reasonable cushion for variable expenses.

How detailed does it need to be?

Only detailed enough to change your behavior. Some people need to categorize every transaction; others only need to know their monthly savings rate. The test is simple: if your current level of detail is letting you hit your savings goals, it is detailed enough.

Three common frameworks

The next three articles cover the three most common budgeting frameworks. Pick the one that matches how you think:

• The 50/30/20 Rule is a light-touch framework that splits your after-tax income into three buckets. Good for people who want simple guardrails.
• Zero-Based Budgeting assigns every dollar a specific job before the month starts. Good for people who want tight control.
• Essential vs Discretionary is a two-bucket approach that makes cutting easy when income drops. Good for people in variable-income situations.

How Horizons uses this

Your Monthly Budget page groups your expenses into categories and shows your surplus or deficit every month. Your Budget Rules page tells the engine what to do with the surplus: pay down debt, contribute to savings, or allocate to specific goals. Together these replicate a functioning household budget inside your forecast.