Money is what allows both people and businesses to survive and it helps them do the activities that they’re supposed to in order to keep on surviving. However, having money isn’t enough as it is also important to learn how to manage it.
That’s why it is very important that one learns how to come up with a budget which ensures that they know where their money is coming from and where it’s heading towards. This article will teach you all that you need to know about how you can come up with a budget document which can help you reach your financial goals.
Elements of a Budget
1. Income/Revenue: It is very important that you know where exactly all of your money is coming from and the amount of money that you are receiving. Doing this can help you plan out things such as your monthly budget as you’ll have an idea as to what you can spend on. Find all the sources of income and revenue and place them all into your budget document.
2. Expenses: Once you’re done making a list of your income/revenue, you must then create a list of all your expenses. This would be all the things that you either want or need to spend on within a certain period of time. It’s important that you consider all of the important expenses especially if you’re running a business. If you’re calculating your business expenses, then factor in things such as production costs or supplier fees that you need to take care of.
3. Debts/Loans: This would be anything that you have to regularly pay for within a given time frame. If you have any debts or loans, then be sure to include them into the budget as you’ll want to make sure that they’re taken care of as soon as possible. Do not forget to include any interest charges that will factor into the total amount.
4. Cash Flow Projection: Always take note of when income comes in and when expenses have to be paid. You should always know the cash flow so that you can better prepare for the payments that need to be made and what you can possibly deduct from your expenses.
5. Projections: This is where you think about how much you could potentially earn and spend on within a given period of time. You’ll need to factor in any regular and irregular income and expenses. Then you’ll need to come up with a rough estimate on just how much money you’ll be acquiring and spending. Again, this should help you when it comes to budget planning as you’ll be able to know your limits and what luxuries you can afford.
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How to Make a Budget
1. Create a list of both your income and expenses: Remember that the first thing that you’ll need to do is come up with a list of all your income and expenses: Another thing that you need to remember are the two types of income and expenses:
- Regular: This would be the income and expenses that you know will come in every day, week, or even month. Simply put, it’s income you definitely know that you’ll receive and expenses that you’ll definitely need to pay for.
- Irregular: It’s the exact opposite wherein you don’t exactly know when you could potentially acquire it. So it’s income that you don’t get on a regular basis or expenses that you know you could pay for at any given point in time.
Divide both income and expenses into the two categories so that you can better plan out your budget.
2. Collect and make use of all finance-related documents: To ensure that you didn’t miss out on including any important source of income or expenses, you’ll want to have kept all financial documents. This would be everything from billing statements that you may have recently acquired to receipts that you’ve gained from product or service purchases. Just make sure that you don’t miss out on anything important.
3. Come up with projections that are close to accurate as possible: Always make sure that whatever income or expense projections you may have will be close to what you’ll actually be receiving or spending. Again, this is important in ensuring that you’ll be able to budget your money carefully so that you won’t be spending more than you’re earning.
Tips for Making a Budget
- Calculate everything accurately: The last thing that you want to do is to miscalculate either your total amount of income or expenses. Even the slightest mishap could potentially ruin your entire budget. Go through the list of figures thoroughly. Make sure that everything is there and then proceed to calculate everything.
- Update your budget whenever needed: Even a simple budget will require updating if there are new sources of income or new expenses that need to be made. Always keep track of both income and expense to see if you need to make any necessary changes to your budget.
Types of Budget
- Weekly Budget
- Daily Budget
- Monthly Budget
- Work Budget
- Household Budget
- Church Budget
- Personal Budget
What can I use to make my budget document?
There are so many different programs available for you to use when it comes to making these types of documents. A good example would be Microsoft Word as it’s easy to utilize and has all the tools one would need to make a budget document. Just choose the one that you think you’ll be comfortable with or the one you know you can learn easily.
What do I do if I go over my intended budget?
If that’s the case, then you’ll need to see what expenses you can cut out or if there are any new sources of income that you can acquire. If you feel like there’s an expense that’s more of a luxury than a need, then it’s suggested that you get rid of it until you acquire the necessary funds which allow for it to be included back into the budget.