Budgeting
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Transcript of Budgeting
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PLAN YOUR MONEY
BUDGETING
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QUESTION?
• What should you do first when you get your money?• Answer: Plan for it! • Put in financial term: Budgeting!
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DEFINITION OF BUDGETING
• A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment.• Simple example
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WHY DO YOU NEED A BUDGET?
• To provide a structured plan to allocate your money among the different uses.• To evaluate on the results of your personal
finances i.e. how closely you have achieved the targets in your budget.
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HOW TO MAKE A BUDGET?
• Type I: Pencil & Paper---a simple budget can be drawn up on paper with the help of a calculator. Items in the budget should include spending on all aspects of life e.g. food, necessities, transport and the amount allocated to each category.• Try it yourself!
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EXAMPLE OF A BUDGET
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EXAMPLE OF A BUDGET (CONT’D)
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HOW TO MAKE A BUDGET
• phase 1: Assess your personal and financial situation (needs, values, life situation).
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HOW TO MAKE A BUDGET
• phase 2: Set personal and financial goals.be realistic: A student working part-time is not likely to be able to afford a
new car every couple of years.be specific“I want to save 5,000 for a down payment to buy a laptop.have a timeframe“I want to pay off my laptop within the next 18 months.”state the action to be takenie through saving money, finding another employment? etc
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HOW TO MAKE A BUDGET
• phase 3: Create a budget for fixed and variable expenses based on projected income.
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HOW TO MAKE A BUDGET
• phase 4: Monitor current spending (saving, investing) patterns.
• budgeted amounts.
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HOW TO MAKE A BUDGET
• phase 5: Compare your budget to what you have actually spent.
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HOW TO MAKE A BUDGET
• phase 6: Review financial progress and revise
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HOW TO MAKE A BUDGET
• Type II: Money-management websites----- Several websites, such as Mint.com and justthrive.com, have been devised to help manage personal finances. They are both free and can be accessed by anyone with internet access.
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WHEN SHOULD YOU MAKE A BUDGET?
• Weekly basis, monthly basis, yearly basis. • Depends on your financial condition• Review along the way.