Budgeting-A Basic Tool for Controlling Your Financial Life Budgeting consists of planning how to allocate the cash you earn/ receive to savings and expenses. A budget, or plan, is prepared for a certain period of time, say, a month or a year. . The use of budgeting will facilitate your: o Living within your means o Identifying those expenses that are excessive or even unnecessary o Starting on the road for achieving financial independence Try to keep the budget exercise simple. Do not attempt to account for every penny- use common sense. Although you do not have to, you may consider using a software package that includes budgeting (Quicken, Microsoft Money). A simplified format of a budget is presented below: Cash Spending Plan-Family For the Month of Cash Inflow Plan (1) Actual (2) Salary Interest Income Total Cash Inflow Difference (3) Plan (1) Actual (2) Difference (3) Cash Outflow Savings (15%) Housing Utilities Food School Tuition Insurance Entertainment Clothing Healthcare Credit Cards/ loan payments Care Expenses Miscellaneous Total Cash Outflow Plan (1) Actual (2) Difference (3) Excess (Deficit) for Month At the end of the month, you should complete column (2) and compare the actual number with your plan-column (1). You should then reflect the differences, or variances, in column (3). If you are having a deficit, you will have to consider what expenses you have to curtail. As mentioned earlier, refer in particular to your major expense categories and determine which individual disbursements are necessary and which represent luxuries or are otherwise not essential. Try not to reduce the percentage you have decided to allocate to savings, and always remember to pay yourself first. Budgeting-A Basic Tool for Controlling Your Financial Life Budgeting consists of planning how to allocate the cash you earn/ receive to savings and expenses. A budget, or plan, is prepared for a certain period of time, say, a month or a year. . The use of budgeting will facilitate your: o Living within your means o Identifying those expenses that are excessive or even unnecessary o Starting on the road for achieving financial independence Try to keep the budget exercise simple. Do not attempt to account for every penny- use common sense. Although you do not have to, you may consider using a software package that includes budgeting (Quicken, Microsoft Money). A simplified format of a budget is presented below: Cash Spending Plan-Family For the Month of Cash Inflow Plan (1) Actual (2) Salary Interest Income Total Cash Inflow Difference (3) Plan (1) Actual (2) Difference (3) Cash Outflow Savings (15%) Housing Utilities Food School Tuition Insurance Entertainment Clothing Healthcare Credit Cards/ loan payments Care Expenses Miscellaneous Total Cash Outflow Plan (1) Actual (2) Difference (3) Excess (Deficit) for Month At the end of the month, you should complete column (2) and compare the actual number with your plan-column (1). You should then reflect the differences, or variances, in column (3). If you are having a deficit, you will have to consider what expenses you have to curtail. As mentioned earlier, refer in particular to your major expense categories and determine which individual disbursements are necessary and which represent luxuries or are otherwise not essential. Try not to reduce the percentage you have decided to allocate to savings, and always remember to pay yourself first
