Household finances are a dynamic and complex mixture of activities that result from the simple acts of receiving money (income) and then either spending it (expenses) or saving it (set asides). The activities are the same for everyone; what makes them dynamic and complex is that everyone does them differently.
- Receive income
- Spend cash for out-of-pocket expenses
- Pay bills
- Use credit cards
- Save up to buy something
- Save for short- and long-term goals
Effectively managing household finances requires a standard framework that is flexible to accommodate everyone's unique way of handling their money. In A Real Budget, that standard framework is referred to as a budget space.
You can think of a budget space as a file folder in which you have all of the tools you need to manage your household finances:
- the managed checking account,
- the budget for the money that flows through that checking account,
- the debt-to-income ratio for the incomes that flow through the checking account, and
- your net worth from all assets and liabilities associated with the checking account.
When you first start A Real Budget, the Primary budget space is created for you. You can change the name of the Primary budget space, but, you may not delete it. There is no limit to the number of additional budget spaces that you can add.
Each budget space that you maintain in A Real Budget is kept separate from all other budget spaces. You can switch to another budget space at any time.
When you add a new budget space it is inactive. There is no pressure to finish setting up a new budget space quickly. A budget space "goes live" the first time you pay bills. Thereafter, on a day-to-day basis, you use A Real Budget to keep up with inevitable day-to-day changes that happen with your everyday money and to do periodic, routine tasks like paying bills and balancing the monthly bank statement.
Less frequently you may be playing "What If?" with a part of your budget to see how a contemplated change in your income, spending money, bills, credit cards, sinking funds, or savings will affect your spending plan before you commit to the change.