A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses and revenues.

It is a plan for saving, borrowing and spending.[1] A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast.

Contents
[hide]

1 Why do we produce budgets? 2 Business start-up budget 3 Corporate budget 4 Event management budget 5 Government budget o 5.1 United States o 5.2 United Kingdom o 5.3 India o 5.4 Philippines 6 Personal or family budget 7 Budget types 8 See also 9 References 10 External links

[edit] Why do we produce budgets?

Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include:

To control resources To communicate plans to various responsibility center managers. To motivate managers to strive to achieve budget goals. To evaluate the performance of managers

[edit] Business start-up budget

The process of calculating the costs of starting a small business begins with a list of all necessary purchases including tangible assets (for example, equipment, inventory) and services (for example, remodeling, insurance), working capital, sources and collateral. The budget should contain a narrative explaining how you decided on the amount of this reserve and a description of the expected financial results of business activities. The assets should be valued with each and every cost. All other expenses are like labour factory overhead all freshmen expenses are also included into business budgeting.

[edit] Corporate budget

The budget of a company is often compiled annually, but may not be. A finished budget, usually requiring considerable effort, is a plan for the short-term future, typically one year (see budget year). While traditionally the Finance department compiles the company's budget, modern software allows hundreds or even thousands of people in various departments (operations, human resources, IT, etc.) to list their expected revenues and expenses in the final budget. If the actual figures delivered through the budget period come close to the budget, this suggests that the managers understand their business and have been successfully driving it in the intended direction. On the other hand, if the figures diverge wildly from the budget, this sends an 'out of control' signal, and the share price could suffer as a result.

[edit] Event management budget

A budget is a fundamental tool for an event director to predict with reasonable accuracy whether the event will result in a profit, a loss or will break-even. A budget can also be used as a pricing tool. There are two basic approaches or philosophies when it comes to budgeting. One approach is telling you on mathematical models, and the other on people. The first school of thought believes that financial models, if properly constructed, can be used to predict the future. The focus is on variables, inputs and outputs, drivers and the like. Investments of time and money are devoted to perfecting these models, which are typically held in some type of financial spreadsheet application. The other school of thought holds that its not about models, its about people. No matter how sophisticated models can get, the best information comes from the people in the

business. The focus is therefore in engaging the managers in the business more fully in the budget process, and building accountability for the results. The companies that adhere to this approach have their managers develop their own budgets. While many companies would say that they do both, in reality the investment of time and money falls squarely in one approach or the other.

[edit] Government budget

For more details on this topic, see Government budget. The budget of a government is a summary or plan of the intended revenues and expenditures of that government.

[edit] United States

Main article: United States federal budget The federal budget is prepared by the Office of Management and Budget, and submitted to Congress for consideration. Invariably, Congress makes many and substantial changes. Nearly all American states are required to have balanced budgets, but the federal government is allowed to run deficits.

[edit] United Kingdom

Main article: United Kingdom budget The budget is prepared by the Treasury under the direction of the Chancellor of the Exchequer. Parliament rarely makes any significant amendments.

[edit] India
Main article: Union budget of India The budget is prepared by the Budget Division of Department of Economic Affairs of the Ministry of Finance annually. This includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery is in operation in relation to a State or a Union Territory, preparation of the Budget of such State. The railway budget is presented separately.

[edit] Philippines
The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and zero-based (budget preparation). The Department of Budget and Management prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate.

After both houses of Congress approves the GAB, the President signs the bill into a General Appropriations Act (GAA); also, the President may opt to veto the GAB and have it returned to the legislative branch or leave the bill unsigned for 30 days and lapse into law. There are two types of budget bill veto: the line-item veto and the veto of the whole budget.

[edit] Personal or family budget

For more details on this topic, see Personal budget. In a personal or family budget all sources of income (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows (making ends meet). In consumer theory, the equation restricting an individual or household to spend no more than its total resources is often called the budget constraint.

[edit] Budget types

Sales budget an estimate of future sales, often broken down into both units and dollars. It is used to create company sales goals. Production budget an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies. Cash flow/cash budget a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing. Marketing budget an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service. Project budget a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. Revenue budget consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies. Expenditure budget includes spending data items.

Making a Budget
The good thing about most bills is that they are generally the same each month. This may not be true for electric, gas, water, etc, but you can have a good idea of what it will be. What you need to do is grab a piece of paper and write down how much income you will be taking in for the month. This amount needs to be after taxes, and is your starting point. When you have the amount you will make for the month you must subtract every bill that you will have to pay. Do not forget about any bills. When you subtract the bills you will then have a final amount. This is the amount you will have after your bills for everything else including gas, food, etc. If you want to make a more advanced budget then you can also budget in the average amount you spend on food and gas a month. You must start out with a budget though, and it does not have to be advanced. You just need to have an idea of how much money you are making and where it all has to go.

Why Make a Budget?

You may know all the bills you have, and you might even pay them on time. That is a very good thing, and you need to keep doing it. You might even think that you do not need to make a budget because of this reason. A budget helps you unlock your finances though. When you see how much money you have after bills then you can figure out how your money will work best or you. You might be able to pay off more of your debts one month, or you might be able to start a college fund for your kids. In order to fix bad credit score you must know how your money works each month and you must maximize it. You may be doing well with your finances right now, and making a budget will only help you out. A budget can help in so many ways. You do not even have to take a lot of time on it. You just need to know how much you make and where you money must go. When you have a better idea of this you will be able to make your money truly work for you. In the end, that is a very important thing.

The Importance of Budgeting

Homeownership is expensive and unpredictable -- you never know when the pipes are going to burst or the roof will need repairs. That why it's essential for homeowners to have some money put away "for a rainy day." In order to save money consistently, you need to be able to live on a budget. A budget is a detailed plan to make your income cover your expenses. It also provides the basis for finding ways to save money on a regular basis. Creating a budget is a key part of preparing for homeownership. If you don't already have a budget, it's probably time to start one. This is the best way to ensure that you are always in a position to pay essential bills. CCCS-OC offers excellent workshops to help you learn budgeting basics and money management skills. Click here for more information.

Budget Basics
To help you get started, here are some budget basics that have been tried and tested over the years: 1. Know what bills are due and when. 2. Know how you spend your money. Get in the habit of saving receipts. 3. Plan for large periodic expenses such as property taxes (if they're not paid by the lender), homeowners insurance, and car insurance. You should also plan ahead for major purchases rather than making impulsive decisions. Whenever you purchase anything on time, look carefully at the financing terms, including the annual percentage rate (APR). 4. Budget for regular maintenance and unexpected repairs. Some experts suggest budgeting one percent of the purchase price of the house for annual maintenance and repairs. 5. Adhere to a regular savings plan. Many financial advisers suggest saving five percent of your take-home pay.

Analyzing Your Current Expenses

If you've never lived on a budget, you may not have a clear idea of how you spend your money from month to month. If this is your situation, you need to take a look at your spending patterns. To get started, try keeping a record of everything you spend for a fourweek period. Then you can group your expenses into the following categories.

Fixed Expenses - such as car payments, groceries, utilities, taxes, and day care. Discretionary - that is, you have considerable flexibility in deciding how much or how little to spend in these areas (for example, clothing and entertainment).

Examining your spending habits will give you a pretty good idea of what is truly important to you as an individual. In light of this examination, you may find yourself wondering just how important it is to you to own your home. A

The first and most important step to effective financial planning is developing and implementing a budget. That, of course, sounds easy and even simplistic. But if it were so easy, do you think that so many millions of people would be as deeply in debt as they are? In its simplest form, budgeting simply means to live within one's financial means. This is in sharp contrast to the prevailing lifestyle of "living beyond your means". And how do you live beyond your means? The answer, of course, is by using credit. If your debt is already out of control, it will be that much harder to implement a budget. However, it's doubly important that you do begin a budget if you are in debt. Without one, it's a virtual certainty that you'll never be able to live without debt. (For tips on debt reduction, please read the article Get Out, and Stay Out, of Debt!) A budget forces you to get your spending under control, to "live below your means". And if you have debt that must be paid off, living below your means is exactly what you're going to have to do. Only then will you free up money that can go toward reducing and eliminating your debt.

How to Create a Budget

So, how do you make a budget? There are numerous charts and software and all kinds of things that you can buy to help you. They're all fine, but all that you really need is a notebook, a pencil, and a small calculator. Once you have these tools, sit down and annotate everything that you spend money on in a month. Everything! You need to know exactly where your money is going, every penny of it. This may take more than one sitting, because you may have to track your expenditures for awhile, possibly a whole pay period. Keep all of your receipts. Ascertaining your monthly bills shouldn't be much of a problem. You know what your mortgage and car payments are, along with your utility bills. It's the money that seems to slip away from you with nothing to show for it that you really need to concern yourself with. This is the area that you need to track. Once you're aware of what you're spending your money on, you'll be able to put it down on paper. Make columns on your paper and label them with the different categories of your spending, i.e. car payment, insurance payment, house, gas, groceries, and so forth. Make a column for everything. Minor expenditures can be combined into a "miscellaneous spending" column. You're probably already surprised at the amount of money that's spent on trivial, or at least unnecessary, items. Allocate your available funds to cover your necessary bills first. As they're paid, keep track of them on your budget sheet. Do not allocate as many funds for the miscellaneous expenditures as you have been used to spending on them. For example, if you've been spending $100 per month on entertainment, only allocate $50 in your budget. Then once you've spent your allocated amount, don't spend any more for that column! It takes discipline, but its well worth it. The money that you've saved can go toward paying down the principal of your debts, or into a savings or investment account.

It will be difficult at first, but most behavioral changes are. You're changing your mindset and attitude toward your money, and that takes time. But the longer you do it, the easier it becomes. It won't be too long before your budget has become your habit. And with your spending under control, you'll be well on your way to meeting your long-term financial goals.

The Importance of Budgeting

Are we meeting our budget? Do we have enough cash? What is the budget for this project? These questions are asked regularly at nonprofit organizations. Whether it's a board member doing his or her job, or employees determining their spending limits, accounting personnel are frequently asked about budgets. The ability to budget effectively is a very important part of being a successful nonprofit organization. A budget can be useful in setting standards of performance, motivating board and staff members, and providing a tool to measure results Fulfilling the organization's mission is the main goal, and budgeting makes it possible. The budgeting process begins with zero-based budgeting, which is recommended at least every two years. Starting at zero and determining the needs of each department and program can provide a far more accurate budget than allowing for a simple incremental increase each year. Additionally, budgets should be conservative. Expenses should be overestimated by as much as 10 percent, and revenues should be underestimated to allow some flexibility. Involving board members, fundraising staff, accounting staff and other department heads is critical in this process. This allows for a concentrated look at the organization's mission, while considering the projected revenues and resources to meet those needs. Budgeting also plays a critical role in strategic planning. Many factors must be considered when outlining future financial goals, including:

Technology needs Capital improvements Overhead needs Planned giving and capital campaign revenue Borrowing funds

Technology
As software and hardware needs become more sophisticated, annual budgeting is a must. Budgeting for technology requires organizations to realize that since computers must be replaced essentially every three years, it makes sense to budget replacing one third of your computers each year. Unless you plan ahead and include the costs of technology changes in your budget, you may find your organization going without the benefits of technology or expending significant amounts of money in order to upgrade their technology.

Capital Improvements
Determining the funding needed for capital improvements is as important for many nonprofit organizations as it is for for-profit. What are the expansion needs of the

organization? Are leasehold improvements reaching the end of their expected lives? These are all questions that may be answered easily; however, if they are not considered during the budgeting process, your organization may find its expenses far exceeding the funds set aside for these projects.

Meeting Overhead Needs

As many organizations have recognized over the past year, utility costs are certainly not a constant factor. Although it is not possible to predict fluctuations in variable costs such as these, your organization must consider inflation and other increases in overhead costs. In addition, it is important to review trends and determine if certain costs are unnecessary. Many organizations are driven by program grants, which often do not cover overhead costs and therefore may cause a deficit situation. Consider an unrestricted giving campaign. By involving the fundraising personnel, you can discuss this option and the estimated contributions that can be expected. When considering this type of fundraising, consider planned giving programs and soliciting for specific operating costs. Ask a donor to take over a monthly bill to help cut your overhead. Although nonprofit organizations are mission driven, overhead costs can get out of control if not closely monitored and budgeted for.

Planned Giving and Capital Campaign

Although budgeting seems to involve an in-depth look at an organization's expenses, it is imperative to consider future inflows. Revenues from planned giving and capital campaigns can be substantial. During the budgeting process, it may be very obvious that shortfalls in future periods will require substantial fundraising. Maybe it's time for your organization to organize a capital campaign or bring someone on board to establish planned giving arrangements. It all depends on what your organization's needs will be over the next few years.

Borrowing Funds
Many nonprofit organizations never consider borrowing as part of their financial strategies. However, when there is a legitimate need for it, the use of borrowed funds can allow organizations to place less reliance on the timing of donations and fundraising events. If your organization is considering the purchase of equipment, remodeling or purchasing a new building or needs additional funds to cover operations during a period of low cash inflows, a line of credit may help your organization to function more smoothly. Budgeting is an ongoing process. Budgets should be revised throughout the year and allow for increases or decreases in the budget as necessary. Not only should the board monitor the budget, management and staff should constantly scrutinize actual results in comparison to the amounts budgeted. It is important that procedures are in place to make sure that the difference between what was budgeted and what actually happened are being appropriately

addressed. A well-prepared budget can help determine where the organization has been and prepare for its future.

Finance Minister Pranab Mukherjee presented the Union Budget for the year 2012-13, his seventh. At the very beginning of his speech Mr Mukherjee said that a "year of recovery interrupted" meant that it was time to take tough decisions. The idea ahead of the budget was that fiscal deficit needed to be controlled by cutting subsidies and raising taxes. The finance minister has raised taxes and promised cuts in subsidies. Here are the highlights of the Budget.

Income tax exemption limit raised to Rs.2 lakh to provide relief of Rs.2,000 for all assessees; 20 per cent tax on income over Rs.10 lakh, up from Rs.8 lakh. Deduction of up to Rs.10,000 from interest from savings bank accounts. Defence to get Rs.1.93 lakh crore during 2012-13. Service tax rate raised from 10 per cent to 12 per cent to bring in Rs.18,660 crore. Number of proactive steps taken on black money (stashed away abroad); information has started flowing in, prosecution to be initiated; White Paper in current session. No change in corporate taxes but measures to enable them better access funds. Withholding tax on external commercial borrowings reduced from 20 per cent to five per cent for power, airlines, roads, bridges, affordable houses and fertiliser sectors. National Skill Development Fund allocated Rs.1,000 crore. Four thousand residential quarters to be constructed for paramilitary forces with an allocation of Rs.1,185 crore. National Population Register to be completed in two years. Excise duty raised from 10 to 12 per cent. Cinema industry exempted from service tax. Branded silver jewellery fully exempt from excise duty. Customs duty on warning systems/track upgrade equipment for railways reduced from 10 per cent to 7.5 per cent. Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 per cent. Allocation of Rs.200 crore for research on climate change.

Irrigation and water resource company to be operationalised. National mission on food processing to be started in cooperation with state governments. Integrated Child Development Scheme to be strengthened and restructured with allocation of Rs.15,850 crore. Allocation of Rs.14,000 crore for rural water supply and sanitation. Infusion of Rs.15,888 crore in public sector banks, regional rural banks and NABARD in 2012-13. Infrastructure will require Rs.50 lakh crore in 12th Plan, half of this from the private sector. Completion of highway projects 44 per cent higher than in previous fiscal. External commercial borrowing of up to $1 billion permitted for airline sector. External commercial borrowings permitted to low-cost housing sector. From 2012-13, full subsidies for providing food security; in other sectors to the extent the economy can bear this. Hope to raise Rs.30,000 crore from disinvestments. New equity savings scheme to provide for income tax deduction of 50 per cent for those who invest Rs.50,000 in equity and whose annual income is less than Rs.10 lakh. Corporate market reforms to be initiated. Bills on micro-finance institutions, national land bank and public debt management among those to be introduced in 2012-13. Addressing malnutrition, black money and corruption in public life among five priorities in year ahead. India's inflation structural, driven largely by agricultural constraints. Current account deficit 3.6 per cent in 2011-12; this put pressure on exchange rate. Growth in 2012-13 estimated at 7.6 per cent; expect inflation to be lower. Better monitoring of expenditure on government schemes.

Fiscal 2011-12 year of recovery interrupted; reality turned out to be different. GDP growth in 2011-12 estimated at 6.9 per cent; had to battle double digit inflation for two years. Good news: agriculture and services continued to perform well; economy is now turning around; recovery in core sectors. Now at juncture where it is necessary to take hard decisions; have to accelerate pace of reforms.

How Budget 2012 enhances your savings kitty

NEW DELHI: By now, you know that it is a status quo Budget when it comes to tax planning, save for a bit of tinkering. So, go ahead with your old tax planning measures in the coming year, too, as the implementation of the Direct Taxes Code (DTC) has been postponed yet again. The two additional tax breaks extended by the budget are: one, if your annual income is below Rs 10 lakh, you can invest up to Rs 50,000 in stocks through Rajiv Gandhi Equity Savings Scheme. Two, you can claim a tax deduction of up to Rs 5,000 for preventive health check-ups. However, you need to wait for a few days for more clarity on these two proposals. And, how can one forget the enhanced new tax slabs and exemption limit that would help you save some more money! But, don't look for ways to splurge as you may end up spending more on your bills due to the hike in service taxes and duties. While your investments should be based solely on your goal-oriented financial plan, you can always make use of some budgetary measures to enhance their value. Savings Bank Really Helps You Save Typically, financial planners recommend setting aside an amount equal to six months' expenses in a fixed deposit or a liquid mutual fund. "Now, however, there is a reason to direct these funds to savings bank account instead," says Prerana Salaskar-Apte, chartered accountant and certified financial planner, The Tipping Point. For, the Budget proposes to leave savings bank interest up to Rs 10,000 per year out of the tax net. "This, combined with the post-deregulation savings rate of 6-7% offered by some banks, makes savings bank account a good avenue for parking short-term funds meant for contingency needs," Prerana adds. The exemption may also force you to change your habit of simply channelising any surplus money into fixed deposits. "As interest from fixed deposit is taxable, it will be a good idea to evaluate the net impact of keeping money in fixed deposit vis-a-vis saving bank account, and the latter may be preferable because of liquidity," adds Vineet Agarwal, director, KPMG. Think Before You Spend "If at all there is a toss-up between saving and consuming, I would prefer to consume less and channelise the amount into one of the myriad investment options available. However, the impact of increased tax-saving will differ based on the slab that you are in," says Jayant Pai, CFP and head, marketing, PPFAS Asset Management.

For a person in the 10% slab, life is virtually unchanged. But those who fall under the other two slabs may see some savings due to lower taxes. Investing In Equity To Save Taxes The finance minister has announced the Rajiv Gandhi Equity Savings Scheme that will allow deduction of 50% to new retail investors with an annual income of less than Rs 10 lakh. To claim the same, they will have to invest up to Rs 50,000 directly in equities, with the maximum deduction amounting to Rs 25,000. However, experts say the scheme needs some clarity. "The new retail investors would mean those who have not opened a demat account so far," says Rajiv Bajaj, vice-chairman and MD, Bajaj Capital. "It would not be a very bright idea to avail of this scheme if it is restricted only to direct equity investments and not to equity mutual funds, as the ability of retail investors to choose good stocks (and that too with a three year lock-in) is doubtful," says Jayant Pai. Also, in the next financial year, both ELSS (equity-linked savings scheme) and RGESS may be available depending upon the final DTC guidelines. "Considering that the RGESS is restricted to those earning less than Rs 10 lakh per annum, it is unlikely that they may have enough savings to invest in both these options (after availing of other tax benefits u/s80C, 80D etc)," Pai adds. Till 2011-12, risk-averse tax-payers had an additional tax-saving instrument in infrastructure bonds that promised deduction up to Rs 20,000 under 80CCF. The year 2012-13 onwards, you may not be able to claim this benefit as the deduction receives no mention in the Finance Bill. Opinion, though, is divided on whether this tax relief will continue to be available next year and you will have to wait for clarity to emerge in the coming days (the adjoining table does not include this deduction while computing taxsavings). In any case, you can still consider investing in other infrastructure bonds - the FM has proposed to raise Rs 60,000 crore in 2012-13 for financing infrastructure projects. "They can look at investing in taxfree infra bonds that the FM has announced. While these will not qualify for deductions, they will fetch tax-free returns of 8.2-8.3% per annum, which look attractive," says Suresh Surana, founder, RSM Astute Consulting Group.

Importance of Budgeting and Financial Management for Small Business

July 19, 2009 StrategicGrowth In this time of economic hardship, small businesses and micro-businesses are among those being hardest hit particularly with their inability to access lines of credit to help maintain effective cash-flow. Therefore, it is imperative that these business owners take the steps necessary to budget and effectively manage the funds they do have available. However, it is a common occurrence that small businesses, particularly micro-businesses having 10 employees or less, tend to shy away from developing an operating budget. Frequently the businesses are so small or so new that the owners are convinced they have no way of projecting their revenue and therefore have nothing to budget. This is a serious mistake!

In spite of a supposed inability to project revenue, the business is still incurring expenses, therefore it needs to develop a basis from which it can discern business trends and identify opportunities which will enable you to make decisions about how you are running the company. A budget is one of the most important tools to help you do this. To help you understand the value of developing a budget and managing that budget for your small business we offer the article below which recently appeared on Entrepreneur.com. ___________________________________________________________

Even startups need to forecast and planespecially now.

By Asheesh Advani | Entrepreneur Magazine July 2009 Most entrepreneurs detest budgeting. Working on something as old-fashioned as an annual budget confines the imagination and limits flexibility. Still, budgets are more important than ever in todays market environment. Ive heard all the excuses for avoiding budgeting. Startup cash flow is too unpredictable. One big customer order could change the course of the business, so whats the point in setting a budget? I cant predict the capital market, so how can I forecast how much cash Ill raise and be able to spend this year? In my experience, these excuses mask the fact that right-brain creative entrepreneurs just dont like left-brain financial planning. So, if youre running your startup solo, you should force yourself to develop a budget to hold yourself accountable. Here are three reasons why: 1. It will help you to become a better manager. When done properly, budgets can be extraordinarily useful in testing and refining your ability to forecast and manage. While boards like to use budgets to hold managers accountable, the startup CEO can use budgeting to test whether the drivers of his business hold true. One straightforward way to do this is to set an annual budget with a set of key assumptions (e.g., number of new clients; product price), then reforecast the year every quarter by updating those assumptions with the latest results. 2. It will help you raise money. When I raised money from angel investors or institutional investors, I learned firsthand the importance of budgeting. Investment terms often specify that management must provide the investors or the board with an annual budget. Developing a company culture that tracks results to budget will help you meet and exceed the expectations of your investors. 3. It will help you avoid running out of money. The No. 1 risk to any startup is running out of money. If youre like most entrepreneurs, youll fluctuate between a conservative reality and an aggressive dream state, which keeps you motivated and helps you inspire others. When you build your budget, start with expenses, not revenue; theyre much easier to forecast. This will keep you grounded and reduce your risk of running out of money.

The Importance of Budget Building

by: BMA Editorial Team 3 Budgeting is one of the most important skills to have to keep your expenses on track, and achieve freedom from debt and financial flexibility. Creating a personal budget will also help develop strong money management skills. Personal budges allow you to make plan for the future and attain greater financial security. By using a budget, you'll know how much money is coming in every month as well as how much needs go out to cover your expenses. Once you know the difference, you can either adjust your lifestyle so that there's less wasteful spending, or you can take the money that's not being used to save for you or your family's future needs. Many people don't realize how useful it can be to plan a budget, budgeting will allow you to find and save the money you need for any number of things, including vacations, college, a new home, or retirement. Using a budget will teach you to value your money, and help you understand its power in your life if you know how to spend it more wisely. Also, if you find that you're in debt, having a budget in place will help you to conquer it quickly. Once you're out of debt, you can more effectively save for your future. To create a budget, you should find a budgeting platform that you're comfortable with. Most people like to use a simple spreadsheet application on the computer. There are also several different budget software options available on the internet for download, either for pay or for free. Of course, if you're not comfortable using the computer, you can always make a budget with pen and paper. Create two columns: one for income, and one for expenses. You'll want to begin by listing all of your fixed expenses: loan repayments, fixed-contract bills, etc. After this list your "variable" expenses: things which you have to pay for in a predictable manner, but which might cost a little more or a little less each month; these things could be food, entertainment, dining out, and many others. For these items, put down an estimated amount of how much you currently spend. Add together all the totals in the expenses category, then list any income, and add that together as well. Don't forget to deduct taxes and other costs from your gross income to get your net income. Subtract your expenses from your income to find the difference. If you have a surplus, then you can use that money for savings: vacations, a home, or even for emergencies. If, however, you find that you have a deficit, try to find places where you can adjust the amounts that you pay so that your budget is at least balanced. (Variable expenses are a good place to start.)

You'll find at 20-25% of your total costs can be reduced simply by cutting back in areas like entertainment and paying off your credit cards. If you're able to pay off your debts quickly, that's more money that you gather interest on in savings, rather than paying interest on it. Also think about comparing your budgets from month to month to see if there are places where you're doing better, or could be doing better with a little tweaking...