Budgeting

Budget (from French bougette, purse) generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

  1. Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out.
  2. Enable the actual financial operation of the business to be measured against the forecast.

Tracking day to day spending can help you to avoid wasting money and to develop a budget. A budget is spending plan that helps you forecast and control your expenses. Knowing what you spend now is the first step in creating a budget.

To create a budget you need to know how much you spend each month and then compare that figure to your take home pay. Once you have established a budget and lived with it for a few weeks or months, you will have a good picture on what you can cut on. If you spend less than you earn, you will have save money to save.

A good budget must be driven by the concept of pay yourself first. By creating a workable budget and tracking, prioritizing and reducing spending it's possible to create savings.

Take Control of Your Money

When you create a budget, you take control of your money so that it doesn’t control you. Don’t let the negative image of a budget making your life miserable keep you from taking control. You can still enjoy yourself and even include discretionary or “fun money” in your budget. The goal is to simply create an outline for your money that puts you in control so that it doesn’t control you.

A simple budget is divided into 2 parts.

  • Income
  • Expenses

Income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received in a given period of time, and expense is an outflow of cash or other valuable assets from a person or company to another person or company.

Expenses are divided into many pieces including:

  • Fix Expenses
  • Variable expenses
  • Occasion expenses
  • Savings