Budgeting: needs, wants and making money last

A budget is a plan for your money. It helps you make sure you do not spend more than you have.

Practise this lesson free (6 questions)

Income and expenditure

Income is money coming in, such as pocket money, wages or gifts.
Expenditure is money going out: what you spend.
A budget is a plan that compares income and expenditure over a period, such as a week or month.

Needs and wants

Needs are things you must have, such as food, housing, heating and travel to school or work.
Wants are things that are nice to have, such as new trainers or games.
A sensible budget pays for needs first, then saves, then spends on wants.
You also have to make choices: spending money on one thing means you cannot spend it on something else.

Balancing a budget

If income is more than expenditure, you have a surplus: money left over to save.
If expenditure is more than income, you have a deficit: you are short, and may need to cut spending or borrow.
If they are equal, the budget is balanced.
Monthly budget£
Income: pocket money40
Phone top-up12
Bus fares8
Cinema and snacks15
Left over5
Worked example

Mia gets £40 a month. She spends £12 on her phone, £8 on bus fares and £15 on cinema trips. Does she have a surplus or deficit?

  1. Add up expenditure: 12 + 8 + 15 = £35.
  2. Compare with income: £40 minus £35 = £5.
  3. Income is more than expenditure, so it is a surplus.

Answer: A surplus of £5.

Key idea

A budget compares income (money in) with expenditure (money out). Pay for needs before wants. More income than spending is a surplus; more spending than income is a deficit.

Key words
Budget
A plan comparing money coming in (income) with money going out (expenditure) over a period.
Income
Money coming in, such as wages, pocket money or gifts.
Expenditure
Money going out: what is spent.
Surplus
When income is greater than spending, leaving money over.
Deficit
When spending is greater than income.

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Extra practice

2 more questions

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  1. Which of these is income for a teenager?

    1. Buying a bus pass
    2. Pocket money from parents
    3. Paying for a haircut
    4. Paying a mobile phone bill
    Show the answer

    Answer: Pocket money from parents

    Income is money coming in, such as wages or pocket money.

  2. Which of these is a want rather than a need?

    1. Shelter
    2. Water
    3. Warm clothes in winter
    4. A new games console
    Show the answer

    Answer: A new games console

    Wants are nice to have; needs are things we must have to live.

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Sources and references

Checked by the GCSE-ready editorial team, 23 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.