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Budgeting

Budgeting
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Budgeting is an important aspect of financial Planning. Many people are lax in budgeting because they think it is time consuming and others think it will limit their fun. The budget is about knowing how much money you earn, how you spend it and then planning how you can spend your money wisely. There are many benefits of planning for your money and tracking down spending making sure expenses remain within the budget. This is the only way to plan the future and solve money problems.

Budgeting starts with setting goals. The goals are set out and money to fulfill these goals is budgeted for. You may be planning to buy a car, take a mortgage to buy a home, take your children to college, retire in addition to the many expenses that you and your family incur. 

The individual has to budget the income he expects to earn in the future. This may be from salary, overtime, bonuses, interest, dividends and from business. Money which you are not sure you will get should be left out i.e. gifts until you receive it. All this income should be analyzed per month from January to December. Some people earn a salary and by mid-month they find they do not have enough money to take them through to the end of the month. Budgeting helps to add up all your income in order to plan what is possible and what is not possible.

When you analyze the income which you earn each month, it gives you an idea whether to adjust your spending or to look for ways you can earn more income by changing your job to a better paying job, working on two jobs instead of one, working overtime or furthering your education in order to get a promotion. Whatever your goals are, you should budget your expected monthly income based on the current income which you are earning and add the increase in income which you expect to earn.

You will need to match the income with the expenses and leave money for emergencies, savings, investments, buying assets and retirement. You should divide he expenses into fixed and variable expenses. Fixed expenses remain the same and have to be paid. These include rent, mortgages, loan repayments and insurance premiums as they are and make adjustments as you deem necessary. Variable expenses include groceries, gas, electricity, water, books, telephone, entertainment, vacation, deduct the expenses from the income. If the net is negative then you will need to earn more money or you will cut down on your expenses or a combination of both. You should have money left for emergencies, savings and investments. Put money aside for retirement and invest it in retirement plans.
 
Budgeting does not have to be complex. A note book, pen and a calculator is all that you need. You can also use online Budgeting software to be able to budget in an orderly manner especially if you are not sure what to do. 

Last modified onTuesday, 02 April 2013 23:48
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