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. I would like you to discuss your own budgeting process (please address each of the bullets below):

1. 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.
2. Which of your expenses are fixed? Which are variable? Do you have any mixed expenses?
3. 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

The personal budgeting process is always the scheduling to our expenses as per our income resources. The personal budget works towards the restricting the spending on various utilities and making it more effective spending towards the target expected income during the period.

The personal budgeting process includes:

1) Getting your all sources of income: The budget starts with the collecting the various sources of income, which could be salary, rent, interest and dividend. We have to plan our expenses within these resources.

2) Collection of all bills and statements: The next step is to collect all statements of bank and EMIs, electricity and other utilities bills.

3) Make the summary of the whole month expenses: The summarizing of the expenses of the month is the next step which includes the monthly EMIs, groceries , electricity & other utilities, insurance and entertainments expenses.

4) Categorizing the expenses into Fixed, Variable and semi-fixed expenses: The categorizing the expenses is essential as different payment are required to be paid as per their schedule. The expenses like rent and EMIs, cable and telephone expenses, regular credit card payments are the fixed expenses. The certain expenses are there which depends on our consumptions for actual definition like groceries , fuel, entertainments and gifts, fooding expenses, etc. In personal budget, there hardly exist any semi-fixed expenses.

5) Matching the income with expenses: We have to match our expenses with the income resources by tallying the total income with the total expenses which we have listed-out earlier.

6) If expenses exceed the income then adjustments required: Our goal is to keep our expenses within our target ie. our income resources, so if the expenses exceeds the total income, there is immediate requirement to do adjustments and cut out our expenses on budget.

The budgeting process of a business and personal house-holding stands in the same category as at both places the expenses has to limit-out to the incomes which are expected to be generated during the period. So, we can have same methods of preparing budget at both places.

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