The Wise Investor
would probably be right.
"Remember, though, that you would be spending this
money anyway. All you are doing is being more organised
about the whole thing. You will need a moderate amount
from each pay packet, instead of a small amount from one
pay packet and a massive amount from the next.
In business, this money is called 'provisions', because you
are providing for expenses that you know will be coming up.
"OK," said Kate with conviction, "the first rule of
budgeting is to put aside a fixed amount for bills; to make
provisions. This way, I have the peace of mind of knowing
that I will be able to pay each bill when it arrives, and my
cash flow will be smoother, not up one week and down the
"Excellent," John said with pride. "One more point on
provisions, Katie. You can go overboard with provisions,
allocating money for all sorts of things, such as the chance
of expensive car repairs, possible health problems. Life is
full of possibilities, both good and bad. On the whole, I
suggest you put aside provisions for the predictable, regular
bills. All other possibilities are best covered by increasing
your overall wealth."
"Fine," said Kate. This talk was going well and she felt
she was keeping up all the way. "Now the second rule,
"The second step in budgeting," said John, "is a little more
difficult." He hesitated a moment, unsure of how to continue.
"Let me ask you, Kate, what you do at Christmas time."
"Well," she said cautiously, "I save up a little if I can, and
I buy the rest on credit. Credit cards are so convenient,
"True," her grandfather said, "and they do have their
place. I have one myself.
However, we all know that Christmas is coming up, and
we usually know who we will be buying presents for. Kate, I
know it takes some discipline, but you should save up for all