Question

In this unit we discuss the various budgets that are prepared by a company or organization. The process of budgeting is actually similar to how we budget in our own individual, personal lives. In this discussion post, I would like you to discuss your own budgeting process (please address each of the bullets below):

How do you budget your own finances? You don't have to give exact amounts and details, just an overview of your process and various groups of expenses that you have to consider.

Which of your expenses are fixed? Which are variable? Do you have any mixed expenses?

Can you utilize any of the methods or considerations found within this unit, in your own personal budget process? If so, how would you utilize them?

Answer 1

Choosing a Budgeting System

There are four ways to create,track and monitore a budget.

1. The Notebook and Pen: This is the oldest method for budgeting, you simply write down all your sources of income and all your expenses.

2. The Spreadsheet: Most popular spreadsheet software is Microsoft Excel. Spreadsheet lets you organise lot of information easily and does the math for you.

3. Free Online Software: There are several web based software programs available that helps with budgeting, they track your spending so that you can see where your money is going.

4. Financial Software: There are various financial software programs available.

Creating a Budget

There are five basic steps in creating a budget

1. Set Goals: There are two type of goals: immediate and long range. Long range goals deal with saving money and spending over decades, on the other hand immediate goals focus on using money today.

You need to determine the goal to prioritize your necessity.

2. Calculate your income and expenses: After determining your financial goal, you need to evaluate your income and expenses.

Start with making a list of monthly income that include salary, bonus, etc. Estimate amount can be used if you don't know exact amount.

Calculating expenses is divided into three parts

• Fixed Expenses: These expenses have fixed monthly amount, for example mortgage or rent.
• Variable Expenses: These vary from month to month on need, for example groceries and gasoline.
• Discretionary Expenses: These are optional expenses for entertainment and recreation. For eg gym membership, going out for dinner. If you can't afford the basics, these expenses must be avoided.

3. Analyze your Spending and Balance your Checkbook: Goal of budgeting is to make sure expenses doesn't exceed income. It means you need to revisit the discretionary cost and check where you can cut the fat.

If you pay by check, you should keep track of incoming and outgoing money.

4. Revisit your original budget: If you monitor your expenses for a month or two, you can be aware of the areas that need adjusting. Make adjustments to balance inflows with outflows.

Once you adjust the budget, you need to commit to follow it. Savings should be a part of your plan.

5. Commitment: Committing to your budget is a great step towards a better future for you and your family. Don't be afraid to adjust, budgeting is all about balancing.