The word "budget" to many people is a scary term. The reason is it can be intimidating is if a person doesn't know where to begin or how to maintain it throughout the year.
The following discusses the very basics of starting a budget, making adjustments as the year goes on, and how a budget can assist in planning future expenses.
The budget can be a resourceful tool for either a household or a business. Budgets for a business can be very complex in scope.
However, a household budget can be very easy to prepare using a basic spreadsheet. You don't need formal training in accounting to prepare one. The budget can be very helpful to a family who is planning a special vacation, a college fund for the children, or simply making sure at the end of each month, there is a surplus.
It can also demonstrate where the bulk of the expenses go and whether changes need to be made in order to reach your family’s goals.
The best way to begin a budget is to divide expenses into recurring expenses such as utilities, rent or mortgage, and automatic drafts from your bank account and variable expenses such as gas for the car, automobile maintenance expenses, day care expenses, household groceries, and "extras" such as clothes for the children or toys, or dining out.
Using a basic spreadsheet like an Excel program, the first item to go on the budget is your income. This is the basis for the bottom line at the end of the month. Then, enter in the recurring expenses. If you've been paying your bills from your on-line bank, these will be easy to extrapolate. The variable expenses come next, and based on one or two months, you can budget what these will be.
For example, if the grocery bills for the month average P5000, you can enter P5000 for the household grocery expense. Keep in mind that if you've had family or friends visiting, or you entertained during the holidays, this expense can be much higher.
But, for these purposes, it's best to enter an amount that is the "norm" from month to month and adjust those "special" months later on.
After everything is entered in, subtract the income from the expenses and the result will either be a surplus or shortfall for the month. Depending on what the bottom line is, you can then make adjustments by either reducing your variable expenses or taking on extra work to include as additional income.
Once you have the basis for a budget, it's important to keep adjusting it each month for those expenses that are not normal monthly expenses.
For example, if you know property taxes are due on May 30th, budget that into the spreadsheet or if your child needs to go to the doctor in May for a normal checkup, include the co-pay for that month’s expenses.
If you've been consistent with keeping up with your budget, it can be a tremendous informational tool. It can help a family plan for expenses that may be many months away or even a year. Learning from your budget can assist in showing where your money gets spent.
The P8 coffee three times a week on the way to work may not seem like much, but by the end of the year, can add up. Making a simple change such as brewing coffee at home and using a travel mug can be the solution to this particular expense.
Any other budgeting tips that you'd like to add? Please comment below.
