I’m pretty sure you all have come across this term several times in your lives, ‘budgeting’. Accountants know, that budgeting is a crucial element for any successful individual or a thriving business. For those who do not know the what it means, budgeting is simply a plan that shows your cash inflows and outflows. Moreover, it is a snapshot plan, of how much you can spend based on your incomes and expenses, and shows surplus amounts you can save.
The significance of budgeting is that it allows you to have a healthy financial life and saves you troubles of cash deficit and a life of debt. Budgeting allows you to achieve financial goals, and increases clarity on how much money you have.
Here are few steps for you to follow in budgeting:
1. Know your income, how much revenue you earn in a specific period. Find out whether you earn weekly, month or bi-monthly.
2. Determine whether your expenses are fixed or variable, to ensure where your money is going. Fixed expenses remain constant throughout. Variable expenses are the ones which alter, and you have no control over them.
3. Keep a track of your expenses:
• Keep all your expense receipts. • Download budget apps on your mobile phones.
• Find the total amount at the end of each month.
• Review your spending patterns. Identify expenses which are unnecessary and can be eliminated, and expenses which take up a large amount of your income.
• Check your online banking records for verification.
Budgeting not very difficult, and helps you with financial planning. As a result, if your incomes exceed expenses, you can either invest or save. In a contrasting situation, you should reduce expenses and write out SMART Goals for next month to curb excess spending.
Having a budget does not mean that you can’t have fun. It means you make a plan and don’t let your expenses get out of control.