Currently viewing the tag: "Budgeting"
Zero Based Budgeting
The concept of zero based budgeting was introduced in 1960. The concept was initially used for some government and business organizations and more recently has increased attention. Zero based budgeting is a budget-planning procedure for the reevaluation of an organization’s program and expenditures. It requires each manager to justify the entire budget request in detail and places the burden of proof on the manager to justify why authorization to spend any money at all should be granted. It starts with the assumption that zero will be spent on each activity-thus the term “zero base”. What a manager is already spending is not accepted as starting point. Managers are asked to prepare for each activity or operation under their control a “decision package” that includes an analysis of cost, purpose alternative course of action, measure of performance, sequences of not performing the activity, and benefits. The zero based budgeting approach asserts that in building the budget from zero, two types of alternative should be considered by managers: (1) different ways of performing the same activity and (2) different levels of effort in performing the activity.
Success in implementing zero based budgeting requires linkage of zero based budgeting to the long range planning process, sustained support and commitment from executive management, innovation among the managers who makeup the budget decision packages, sale of the procedure to people must perform the work necessary to keep the concept vigorous.
Sound budgeting procedure should always require a careful evaluation of all operating facts each time the budget is prepared. There fore the zero based budgeting procedure is new and unique mainly in approach rather than in basic planning and control philosophy.
Rashid Javed is an Asian author. He writes articles about business and
management accounting. He
focuses on budgeting and planning, business improvement programs, and
financial
statement analysis etc.
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Budgeting Rule #1: Keep it Simple
Sometimes the answers we seek are as plain as the nose on our faces but it is often the simplest things that are the most overlooked when it comes to self-help. As many families continue to look for ways to save money, few will consider the more simplistic debt tips, which actually work the best.
Key Word – Budgeting
One of the most key points of personal finance is budgeting. Because many people having been hearing and reading about budgeting and how to budget, it seems very common advice. But for as common as the subject is, it sure doesn’t mean that people are taking such advice. One reason is because many people think that such an easy step is hardly capable of resolving financial problems. However, when it comes to debt, keeping it simple is exactly the way to go.
There are some individuals that will fight the concept of budgeting all the way, but those who are following the advice of experts have found that budgeting is exactly the advice they needed and since taking the steps to create and institute a budget into their daily lives, have realized how much more manageable finances have become.
Why People Don’t Budget
Another reason people don’t attempt to create a budget is because they make it too complicated and quickly lose faith and interest in the financial tool. They make up some insane charts or spreadsheets to track spending and catalog bill that even they can not follow from week to week. For simplicity, scrap the spreadsheets and buy a notebook from the dollar store next time you stop in. Keep the notebook handy so you can write down all the money you spend in a day. Buy a similar notebook for your spouse to keep track of spending. Write down all spending to the exact penny. It may take awhile to get into the habit of noting your money transactions but keep at it for a solid month. At the end of the month, go through each expense and put it into a category (groceries, junk food, entertainment). Add up the categories for a grand total of what you spent in the last month.
Creating A Workable Budget
Next, you need to gather all of your monthly bills and your paycheck stubs for the month. You will need to have some time to sort through and document all of the money you owe, who you owe it to, and how much you owe. Factor those numbers together for a grand total of your bills. You will then need to add up how much your income is each month. Take the total amount of monthly bills and subtract it from your income amount. What is left over will be your “excess” cash. Now, compare what is left over to how much you actually spend in a month during the tracking process. It is here that you will begin to see how much money you are spending each month that you may not have. It is time to make some cuts to your monthly expenses. Cut down or eliminate entertainment spending, convenience spending, and other items that are “wants” rather than “needs”.
It is that simple to make a budget. But it does require constant upkeep and modification month to month as your different financial needs continue to change. Budgeting is certainly a good money habit you can incorporate into your life and is definitely a necessary tool to managing your money.
Tisha Kulak Tolar is a writer for LeaveDebtBehind.com where she regularly writes about debt consolidation, getting out of debt, debt settlement and saving money.
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Tips for Successful Budgeting
Budgets can be tricky. They seem so simple. All you have to do is subtract your spending from your income and have money left over. Then you set spending goals and stick with them. Easy? Not for most people.
The majority of budgets fail for the same reasons. With a few tips, you can start your budget off on the right foot.
Tip #1: Look to your spending
The vast majority of consumers cannot simply use a preset budget and succeed. We all have different necessities and wants. While gasoline may be a large expense for my family due to commute times, it may not be a consideration for someone who takes the subway to work. One family eats differently than another.
The key is to look at what you are currently spending and find ways to change it. Look to cutting back as much as possible where you can. Don’t just go by the “20% of your income” rule. The key is to keep cutting until you can’t anymore. If you are financially sound, you just need to maintain where you are.
Tip #2: Be accurate
When you are listing your income and expenses, it is essential that you are accurate. Don’t round up or down. In fact, I suggest that you go right down to the penny.
When it comes to your spending, you should track it carefully for at least two months in order to see where you are spending your money. If you leave out the fact that you get a latte every morning on the way to work, you will not have an accurate picture of where your money is going. That is why you can follow your budget, yet not have any money left over at the end of the month.
Tip #3: Think outside of the month
There are a few real budget busters that can wreck your budget. Think about the yearly expenses you have that pop up here and there. You need to include a savings to handle your auto maintenance, homeowner’s insurance, property taxes, service contracts and other yearly expenses. If you put back a little each month, your budget won’t be blown out of the water when they are due. You just pay it and keep going.
Tip #4: Keep reviewing constantly
If you simply make a budget and then file it away, you have wasted your time. Your budget is the one financial tool that you must review frequently. Keep you eye on it. If you need to revise categories, add or subtract columns and trim costs, do it. A budget isn’t set in stone. It is ever fluctuating, just like your finances. By keeping a close eye on it, you are able to make sure that it continues to work.
Budgeting is the best way to become debt free and financially stable. There are so many advantages. But it does take a little work. Start with giving it three months. Work really hard at it for three months, and you will begin to see changes in your financial situation. Keep it up. Sometimes you will drop the ball, but a budget makes it easy to get right back on track.
Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com
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Budgeting 101 ? Making it work
Some of the questions that are hard to find answers to are:
- What do I do with any extra money that I have at the end of the month?
- What do I do if there is too much month at the end of my money?
(Read that again if it didn’t make sense!)
- How do I know how much to save?
- How do I budget and save for big-ticket items like vacations, cars, furniture, etc?
- I’m spending all of my money, how can I adjust so I can save some?
- How can I pay off my debt while living through the month?
First of all, accept that you won’t be able to do everything you want to with your money. This will help with any frustrations that you may feel in the process. It’s impossible to save for a house down-payment, pay off student loans, save for that dream vacation to the Bahamas, new couch, save for your retirement, pay your kid’s college tuition and live all at the same time!
In this first session, you will start to develop the ugly “B” word – the BUDGET!!
Now I know some of you may be put off by that word – feeling your chest tighten and palms sweat. But a budget can be a liberating thing to do – trust me, give it a go.
The second step would be to establish how much you earn after you pay taxes. Do not put any money into pre-tax retirement plans in your budget just yet; just bring all of the money home for the time being. You’ll want to split your expenses into fixed and variable expenses. Your numbers will change be different depending on your income, housing expenses, area of the country/world you live in, etc. but you should get the idea – TAKE CARE OF THE ESSENTIALS FIRST.
Pay your mortgage; keep the lights and heat on; put some food on table; put gas in your car so you can get to work; buy clothes when yours get worn out. Maybe your budget won’t have any payments as you’re debt free, or maybe your budget will be full of them as you try and pay off your debt – wherever you are on that spectrum, make a budget that fits you. When it’s all put on paper, it starts to feel more manageable.
Ok, so you’ve made a budget. Odds are, it won’t land perfectly on “ left at the end of the month.” Maybe it looks tight and you don’t know if you’ll be able to stick to it. Give it time, as it is a hard adjustment to live within your means when you’re not used to.
Also, your budget is meant to be a guide. Every month won’t work out like the one you have on paper. Maybe one month, you’ll have a big car gas bill as you took a road trip, you may have had a lot of gifts to buy one month and your “other expenses” section went over the budgeted amount. Is that your excuse to forget the budget, as you didn’t stick to it? No, go back to it and adjust it so you finish the month without going into debt. Maybe you don’t buy any clothes that month, or you don’t go out as much so you stay in the black.
TAKE CONTROL OF YOUR MONEY. BE ACCOUNTABLE TO YOURSELF.
Your budget most likely won’t work for the first few months as you tweak certain categories and get it to balance. Stick with it and it will eventually work. The sense of control you receive when you have a budget that works will be well worth it!
David Grant
Contributing Writer
MyWealth
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Personal Finance: The Benefits of Budgeting
A budget is the most fundamental and effective financial management tool available to everyone and it doesn’t cost a penny. Absolutely anyone can work out their budget and simply doing so helps you to see how much you earn, how much you spend and where you are spending it.
If you want to work out your own personal budget you can do so in many ways. If you prefer the traditional paper and pen method that is fine as it works just as effectively as using a computer. If you are more akin to personal computers or laptops then you could use a spreadsheet to note down your budget. You can also buy computer programs designed specifically to help with personal finance planning.
A budget tends to have different headings for various kinds of income and spending, against which you can note down your own figures. Monthly outgoings are a good starting point for any budding budget planners.
Begin by making a record of exactly what you spend money on each month. If you cannot remember all outgoings off the top of your head then take a look at recent bank statements and look for regular payments such as gas, electricity, telephone, rent and council tax. If you have any direct debits or standing orders don’t forget to include these.
The next step in the budgeting process is to ascertain what you spend on everyday items such as food and petrol. When budgeting, it is important to include all expenditure to do not forget to include even the smallest of details. If you grab a morning latte before each work each day then this should be accounted for within your budget.
Last but not least, a comprehensive budget will also take into account estimated amounts for occasional costs such as birthdays, Christmas presents, holidays or dentist and optician bills. You may not have an exact figure but an estimate works just fine to give you an idea of how much this adds up to every month.
There are always going to be unexpected bills, if your car breaks down or pet needs to be taken to the vet. These are problematic to accurately account for so it might be easier to set aside a contingency amount each month for unplanned expenses.
Next step in the budget is to list all of your income. Look at recent payslips to get an accurate figure for wages and remember to include any benefits you receive, such as Child Tax Credit.
Work out your total income for a set period of time, usually a week or month, and then subtract your expenditure for that time period. This helps you to work out if you have a shortfall or spare money and from there you can work out what action you need to take, whether it is to cut costs or to save more.
You’ll find several different types of budget calculator on the internet which can also help to sort out your finances.
Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.
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Budgeting For Back to School in Canada
With the significant rise in such living costs as food and gas, as well as the current difficult economic conditions, the costs associated with returning to school can be overwhelming for many families. Whether it is High School or University, families are now finding it difficult to meet education expenses. When preparing to return to school in Canada, it is important to create a budget that will put you in control of your finances.
Statistics Canada reports that “Expenditures on school supplies, textbooks, tuition fees, other courses and lessons, and educational services were reported by 43% of all households in Canada in 2006. As well, 5.5 million households reported expenditures on education.” The Quarterly Retail Commodity Survey reports that “the total clothing and accessories sales across Canada in the third quarter of 2007 included 5.4 million in sales of girls’ clothing and accessories, and 7.6 million in sales for boys’ clothing and accessories. The total value of sales of unisex clothing was 5.7 million.”
With the cost of living so high, it is a great time to implement the following budgeting tips:
1. Calculate Total Income: It is essential to know how much money you are bringing in each month. Prepare a list or table of your income sources. This can include: loans, student grants, and job income.
2. Calculate Total Expenses:
Fixed Expenses: Prepare a list or table of all of your monthly fixed expenses. This can include such costs as tuition, books, computer, school supplies, transportation, rent, heat, telephone, utilities, and monthly credit card payments. Calculate your total monthly expenses.
Flexible Expenses: Make a list of monthly expenses that are mandatory but can vary depending on how and where you spend. These include laundry, food, clothing, toiletries…etc. Calculate the total flexible expenses.
Discretionary Expenses: Make a list or table of such discretionary expenses as entertainment, dining, and unexpected expense amounts…etc. Calculate the total discretionary expenses.
Calculate the total amount of your Fixed Expenses, Flexible Expenses, and Discretionary Expenses.
3. Determine Budget Amount: Subtract the Total Income from the Total Expenses to determine your budget. If your Income is less than your expenses, then return to your expense list and make adjustments until the budget is balanced. For instance, find ways to cut costs such as shopping at used textbook stores, second hand clothing stores, and looking for back to school sales, etc.
4. Monthly Budget: Once you have a Total Income and Expense Balance, divide the amount into a monthly budget list or table which will show you how much you can spend each month.
When budgeting for the school year, make sure keep your receipts and avoid using a credit card and department store card as much as possible. The high interest rates will only add more debt to your budget. If you have extra money at the end of the month, apply it to your debt. It is important to prioritize your expenses and eliminate unnecessary expenses. Every month, review your budget and update it when necessary. Just because budgeting is challenging, that does not mean you cannot live on a practical budget. In fact, now is a great time to learn how to create and live within a budget. In the end, it all comes down to the fact that you are going to school or giving a loved one the chance to go to school to create a great future.
Amy Nutt is a freelance writer who writes on a variety of financial topics including personal budgeting and debt consolidation. For more information about personal finance and credit counselling, ConsolidatedCredit.ca is a tremendous resource on the topic for Canadians.
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