Neeraj was in his favourite toy shop. It was his birthday the next day and his parents had brought him there to buy him a gift. He was excited looking at all the toys. There was a build-it-yourself robot, build-a-motor set, a windmill set and more.
His father said, “Neeraj buy anything you want, but remember you can buy only one toy, and the maximum you can spend is Rs. 800.” He then gave him the money saying, “Here’s Rs. 800. Count it.”
Making a choice
Neeraj was thrilled as he knew that Rs. 800 was a lot of money. He looked around for a while and realised that though he liked quite a few toys and games, he could buy only one. He looked at the robot and it looked good, but it was Rs. 1000. It also had batteries which would have to be changed frequently.
Next, he moved on to the windmill. It was priced at Rs. 800, but he wasn’t satisfied. He was frustrated as he could not find anything that he really wanted which fitted the budget.
That’s when he eyed a box that sported a bright blue race car. The box explained that the kit enabled the user to build a race car from scratch and no batteries were required as it worked on a spring. Neeraj frantically searched for the price. The sticker said Rs. 700. He knew that this was what he wanted.
On their way out of the mall, his father said, “Neeraj, I see that you have Rs. 100 left, you can either buy an ice-cream now or something else later.” After some thought Neeraj decided to save it. He wanted an app he had seen on his friend’s iPad.
Back home, Neeraj’s sister Preeti asked their father, “Why did you say Neeraj should buy something within Rs. 800. Can’t we afford more? Are we poor? ”
Neeraj’s father smiled and said, “Preeti, given this month’s expenses and the house loan that needs to be paid off, Rs. 800 was sufficient. Anything more would have been a little hard on the budget.”
“What is a budget?” asked Neeraj. “You were told that you could buy something for Rs. 800. That was your budget — the money available for you to spend — not a paisa more. You made a choice to buy something that was less expensive and saved Rs. 100 for the future. Similarly, my budget is my monthly salary within which we need to meet all household expenses as well as entertainment. This month is special. As your birthday is fast approaching, mom and I wanted to buy something special for you. So, we saved some money so that you could buy whatever you wanted.”
“Thanks Appa.” said Neeraj.
“By the way, that was a nice car you chose, Neeraj. Let’s open it and see what is inside,” said Neeraj’s father.
In a nutshell
Budget is the choice of spending, people make according to their incomes. Expenses have to be within income limits.
Just as individuals and families have budgets, the government too has a budget. The difference is that the government’s budget is more as it has to cover the needs of the people in the country.
The government’s income comes from different kinds of taxes. Its expenditure includes expenses incurred on building infrastructure and those involved in providing subsidies.
Just like individual families, the government has to try to stick to the budget. If the expenses exceed the revenue, the government will have to borrow to pay the extra expenses.
