Budgeting

Budgeting is the process of planning effectively on how to spend your money.  It is done to ensure that you are able to do the necessary things, spend on important expenses within the money you have.

Savings and Budgeting Basics

In order to have a life under your control, you need to balance each and everything. Budgeting is also one of those things. The basics of savings and budgeting include two main components: Income and Expenditure

Income: Income is the total monthly income that you have from a job or other earning resources. This can also include investment, rental income, social security benefits, dividends and other resources.

Expenditure: The expenditure includes fixed monthly expenses such as rent, bills etc and flexible expenses such as money spent on utilities.

Some of the basics that one must aware of before planning a budget:

• You must know specifically about your monthly income
• Using budgeting tool for creating and monitoring budget
• Be real
• Set goals for long term as well as short term
• Take charge of your actions
• Work with a partner

Monthly Budget

A monthly budget is the planning of the money spent on the expenses from the monthly income so as to achieve some specific goals. It is said to be a great source of calculating a more accurate sight of our spending habits.

Budget Worksheet

Budget Worksheet is a detailed sheet of income and expenses of a month. It allows you to enter all the sources of income and expenses of the month as per your budget so as to achieve a certain goal. This budget worksheet includes Net income worksheet in which all the sources of income are included on monthly basis. The sheet includes monthly expenses worksheet in which every category is assigned a monthly budget so that total monthly expenses do not exceed the set amount of budget. These include rent, fees, property taxes, insurance, repair and maintenance, utility bills, expenses on food, expenses on family obligations, expenses on medical and health, expenses including transportation, debt payments, education, other insurance, pet care, entertainment, personal care, savings, and investments.

Practical Money Skills

• How can I control my spending money?
• How can I take control of my money?
• How do I get my debt under control?
• How do you manage your money?

Personal Budget Basics

Personal Budget basics are must to know if you are looking to save some money for a secure future. These personal budget basics include:

• Household debt
• Credit Card Bills
• Balancing a budget
• Save for your future
• Monthly Income
• Monthly Expenses
• Personal budget worksheet
• Personal Savings
• Average costs
• Calculating budget

Types of Budgeting

Budgeting is classified into various categories. The most common types of budget are

• Capital Budget: A capital budget is the budget set for capital assets along with their costs and expenses of the year such as buildings, land, furniture, computers, equipment etc.
• Operating Budget: An operating budget involves the use of products and services that a firm or company is using in budget period which includes income generating functions of the firm such as sales, production, inventories etc.
• Cash Budget: A cash budget allows us to go through all the cash inflows and outflows for the coming year. It various elements are cash disbursements, cash receipts, financing and net change in cash.
• Sales Budget: The sales budget includes the amount of sales expected in a budget year.
• Personal Budget: The personal budgets includes cost f hiring, training, salaries allotted, benefits, recruitment, overtime costs and other labor costs.

Taking control of your finances, a family budget action plan

Before taking control of your finances, you need to know your income and expenses. In order to calculate your income and expenses, you can use the budget worksheet. This budget worksheet provides you with everything you need to fill out the information required such as each and every source of income as well as expenses. You need to list all the bills, income, goals, information on the worksheet so that you can have everything in one place and can take control of your finances.

The difference between your total income and your essential living expenses

The difference in your total income and the essential living expenses indicates how much you can save and how much you are spending.

How to control my spending habits?

Your spending habits depend on the way you look at things.

• Take a few amount of cash with you instead of credit or debit cards
• More you visualize, more you shop
• Remember your last shopping triggers
• Choose to shop by making a list
• Avoid your weaknesses
• Observe the prices and then buy

How to budget your money with the 50/20/30 guideline?

The simple four-step guideline of 50/20/30 will help you budget your money in a planned way.

Step 1: Have a clear picture of the after tax income

Step 2: Limit to the 50% of the after-tax income to the expenses such as groceries, utilities etc. Make sure to spend this percentage on your needs and not on your wants.

Step 3: Limit your 30% income after-tax to the things or expenses you want.

Step 4: Remaining 20% of the after-tax income to be spent on savings such as repayment of debt, emergency funds, saving money etc.

How to determine budget percentages?

A lot of factors play an important role in determining the budget percentage for your family, for example, the size of family, the location of your living etc. An ideal budget percentage has everything in appropriate percentage like giving 10-15% of income, 25-35% housing, 5-10% utilities, 10-15% food, 5-10% health, 10-15% savings, 10-25% insurance, 10-15% transportation, 10-15% personal and 5-10% recreational etc.

30-30-30-10 Budget

In a 30-30-30-10 Budget,

30% monthly income should be spent on mortgage, fix-up, rent, appliances.

30% of the income should be spent on utilities, internet, school, phones, and groceries.

30% of the income should be spent on credit cards, savings, and loans.

10% of the income can be spent on entertainment, dining, TV etc.

You can have all your expenses fulfilled as well as you can get a part of your income to enjoy as well in this budget rule.

Factors to consider when preparing a budget

The most important factors to consider for preparing a budget are

• Income: You must focus on your net income in order to prepare a budget. Your income is the basis of your budget planning.
• Costs: You must take into account each and every expense that you do to have a proper record of the expenses.
• Balance: It’s an important factor to consider for the budget. Maintaining a balance between income and cost is the key to save money on budgeting.
• Goals: Before preparing a budget plan, you must know how to reach your financial goals by sticking to the budget. Once you start recording your financial information in the worksheet, you will start observing progressive changes in the goals you set.