budgeting

budgeting

  • With all of us having access to only a finite amount of money, sometimes a budget is necessary to manage this resource. The amount of money we do have at our disposal can be attributed to both the size of our income and our expenses, and budgeting at the most basic level is essentially just forecasting and monitoring the relationship between these two amounts.
  • People commonly use budgets to assist in maintaining their standard of living, and help plan towards financial goals. In order for a budget to fulfill these roles, they must be both realistic and closely followed.

creating a budget

  • This video presents 7 key steps in creating an effective budget.

following a budget

  • A budget is a forecast of future income, expenses and savings. In order to increase its accuracy and effectiveness, an individual can review the budget against actual results and make adjustments along the way if they feel some values aren’t being properly represented.
  • Being able to build a detailed picture of your own financial situation can help manage future expectations or increase the predictability of meeting your goals.

practical steps

Step 1

Sit down with a pen and piece of paper, or open-up a Word document on your computer. Jot down a list of your most important financial goals – separate this out into short-term, mid-term, and long-term. For each goal, try to assign a dollar amount that meets each goal. Keep this set of goals for reference down the line.

 

Step 2

Open the Key Money Concepts budget planner template (or another if you feel is more suitable) – and create a budget forecast for the coming period (e.g. 6 months, year). Try to insert fixed expenses in your forecast before variable expenses. Remember that it is better to underestimate income, and overestimate expenses – not the other way around. This way you build a safety buffer into your budget forecast.

 

Step 3

Have a look at the resulting savings in your budget forecast and see if this amount is multiplied over several years, whether it enables you to reach your goals. If not, then preferably you should look to adjust your variable expenses. If you have a tight budget, and still are unable to reach your goals, then perhaps you see whether the goals should be amended.

 

Step 4

Develop a plan as to how you want to manage the savings you generate. Refer to the Investing and Managed Investments modules, for methods of developing an investment portfolio.

 

Step 5

Once you are happy with your forecast, file it away for quick access. During the budget period, collect records of your income and expense to log into a separate spreadsheet – call it “Actualised Income & Expenses”. There are several apps that can help you do this, including ones created by your bank – as an alternative to making manual entries.

 

Step 6

At the end of the period – compare your forecast with your actualised income & expenses. Try to assess what can be improved or changed.

 

Step 7

Add / Change goals from last period to reflect current situation, and create a new a budget forecast for coming period.

Free Divi WordPress Theme, Find new Free Android Games at dlandroid24.com