Income and Expenses
Learn the difference between money coming in and money going out.
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Why income and expenses matters
Every week, money flows in two directions: in and out.
Income is any money that comes to you:
- Weekly allowance: $10
- Gift from grandparent: $20
- Babysitting earnings: $15
Expenses are any money that leaves you:
- Snacks at school: $6
- App purchase: $3
- Gift for friend's birthday: $10
The relationship between income and expenses determines what happens to your balance:
- Income > Expenses = your balance grows (you're saving)
- Income = Expenses = your balance stays the same (breaking even)
- Income < Expenses = your balance shrinks (you're spending more than you earn)
The simple formula
Income − Expenses = What's left. $15 earned, $18 spent = −$3. You spent $3 more than you made. That $3 had to come from somewhere — either from money you'd saved earlier, or borrowed. Over time, spending more than you earn leaves you with less and less until there's nothing left.
Tracking both sides
Most people track expenses pretty well once they start paying attention. But they forget to track income too. If you received $20 for a birthday and $10 allowance but only wrote down the $10 allowance, your records will show you spent more than you earned even if you didn't.
Track everything coming in AND everything going out. Then the gap between them is accurate.
What to remember
The gap between income and expenses is the most important number in any budget. A positive gap (income higher) means you're building savings. A negative gap means you're drawing down savings or going into debt. Most money problems come from not knowing which direction the gap is pointing until it's too late. Tracking both sides tells you immediately.
Budget allocator
Split a monthly income across needs, wants, savings, and a small emergency slice. We normalize your sliders to 100%.
Your 50/30/20 similarity score: 100 / 100 (100 = exact match to 50% needs, 30% wants, 20% savings+emergency).
How to think it through
A simple weekly tracker:
Income this week:
- Allowance: $10
- Birthday gift: $20
- Total in: $30
Expenses this week:
- Snack: $3
- App: $2
- Gift for friend: $8
- Bus: $4
- Total out: $17
Gap: $30 − $17 = $13 (positive — you're ahead this week)
This takes about 3 minutes. You don't need an app or spreadsheet — a piece of paper works fine. The goal is to never be surprised by how much you have left.
Fun fact
The word "budget" comes from the Old French word "bougette," meaning a small leather bag. In medieval times, government officials would carry their financial plans in a small bag to show the king. Even today, the UK government's annual financial statement is called "The Budget"!
Last week you earned $15 in allowance and spent $18 total on snacks and apps.
What happened to your balance, and what should you do differently this week?
Practice the idea
Which choice best shows understanding of income and expenses?
A student faces a friend who spends everything immediately. What is the smartest first step?
Last week you earned $15 in allowance and spent $18 on snacks and apps. What does that mean for your balance?
Which best describes the difference between income and expenses?
Bring it into your life
Try tracking your income and expenses for just one week. Write down every dollar that comes in and every dollar that goes out. At the end of the week, calculate the gap. Is your balance growing, staying the same, or shrinking? Knowing that number is the start of all good money decisions.
Income is all money coming in — allowance, gifts, earnings. Expenses are all money going out — food, apps, transport, gifts for others. Income minus expenses equals what happens to your balance. Positive gap = savings growing. Negative gap = savings shrinking. Track both sides every week so you're never surprised by which way your balance is moving.