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    Personal Budgeting 101:: What Is A Budget and Why Do I Need One!

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    Charlton Benedict Bernabe
    The document provides information on personal budgeting, including why budgets are important, what a budget is, how to create an effective budget, budget components, and tips for budgeting. An effective budget can help achieve financial goals by developing good habits, relieving stress, and directing money flow. A budget is a plan for managing money to meet personal needs and wants. Key steps in budgeting include setting financial goals, estimating income, recording expenses, and reviewing the budget monthly. [/SUMMARY]

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    Personal Budgeting 101:: What Is A Budget and Why Do I Need One!

    Uploaded by

    Charlton Benedict Bernabe
    209 views21 pages
    The document provides information on personal budgeting, including why budgets are important, what a budget is, how to create an effective budget, budget components, and tips for budgeting. An effective budget can help achieve financial goals by developing good habits, relieving stress, and directing money flow. A budget is a plan for managing money to meet personal needs and wants. Key steps in budgeting include setting financial goals, estimating income, recording expenses, and reviewing the budget monthly. [/SUMMARY]

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    Budgeting

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    The document provides information on personal budgeting, including why budgets are important, what a budget is, how to create an effective budget, budget components, and tips for budgeting. An effective budget can help achieve financial goals by developing good habits, relieving stress, and directing money flow. A budget is a plan for managing money to meet personal needs and wants. Key steps in budgeting include setting financial goals, estimating income, recording expenses, and reviewing the budget monthly. [/SUMMARY]

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    209 views21 pages

    Personal Budgeting 101:: What Is A Budget and Why Do I Need One!

    Uploaded by

    Charlton Benedict Bernabe
    The document provides information on personal budgeting, including why budgets are important, what a budget is, how to create an effective budget, budget components, and tips for budgeting. An effective budget can help achieve financial goals by developing good habits, relieving stress, and directing money flow. A budget is a plan for managing money to meet personal needs and wants. Key steps in budgeting include setting financial goals, estimating income, recording expenses, and reviewing the budget monthly. [/SUMMARY]

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    Personal

    Budgeting 101:
    What is a Budget and
    Why do I need one!
    Why It’s Important
    Following a practical budget can
    help you:
    1. Develop better financial habits.
    2. Relieve emotional stress.
    3. Assist you in achieving your
    financial goals.
    Why is a Budget
    Necessary?
    Identifies and defines your financial goals

    Manages your money

    Directs your money flow

    Increase your savings

    Avoids spending money unnecessarily

    Achieves your personal goals


    What is a Budget?
    “…a plan for the coordination of resources and
    expenditures”
    Merriam-Webster Online Dictionary

    Simply Put:

    A budget is a plan for managing


    your money in a way that best meets your
    personal needs and wants.
    Seven Keys to Effective
    Budgeting
    1. Identify and develop personal goals
    2. Evaluate and record current trends,
    both income and expenses
    3. Assign priorities
    4. Develop a time line for the month
    5. Keep it simple
    6. Remain flexible: “One size does not fit all”
    7. Review and revise
    Budgeting is Effective
    Money Management
    Effective money management is planning
    how to get the most from your money.

    Good money managers keep track of where


    their money goes so that they can make it go
    farther.

    Effective money management includes:


    Developing personal financial goals
    Organizing personal financial records
    Creating a personal monthly budget
    Evaluating personal financial health
    How do I Create a Budget?
    Creating a budget begins with a clear,
    accurate, and well-thought-out plan. This
    will allow you to be able to:

    1. Adjust plans, activities, and spending as


    needed
    2. Spend money cost-effectively
    3. Reach the specific goals you have set
    4. Strengthen internal control system
    What’s in a Budget?
    INCOME EXPENSES

    Simply any money Money that you


    earned or spend, this
    contributed to includes anything
    your household you purchase. This
    from either includes both
    personal finances planned and
    or a business. unexpected
    expenses.
    Steps in Budgeting

    1. Set financial goals


    2. Estimate your income
    3. Record what you spend
    4. Budget for actual and unexpected
    expenses
    5. Review and evaluate monthly
    Set Financial Goals
    Identify and write them down
    Long term (1-5 years)
    Short term (within a year)

    Make then achievable, practical, and owned by


    everyone
    Keep them in the fore front
    Journal the process
    Celebrate their completion

    Write them into your monthly budget


    Adjust them as necessary
    Estimate Your Income
    Make a list of each income stream that you receive on a
    regular basis each month. The key is to only include that
    income you get every month.
    Include both monthly wages earned from your job(s) as
    well as monthly supplemental income (i.e. child support,
    disability, etc.)
    Mark down the date these are received
    Calculate the monthly income total
    Record, but do not include any periodic income you may
    receive at this point.
    Estimate Your Income

    If your income is unpredictable,


    estimate what you will receive in the
    next month and adjust it DOWN a little
    Record What You Spend

    1. Review the previous month’s check


    book ledger, bank statements etc. and
    record your spending and income.
    2. Record what you spend for the next
    month and write down what your
    actual expenses and income
    Budget for Actual and
    Unexpected Expenses
    Actual Expenses:
    Identify fixed expenses (i.e. rent, car payment, student
    loans).
    Record the monthly payment deadline and plan according
    to your payday date.
    Variable Expenses:
    Identify recurring expenses the fluctuate (monthly grocery,
    automobile, etc.) calculate an average based on
    previous months NOTE: when in doubt, guess high!
    Consult with friends and family on what they spend
    Actual Expenses
    Rent or Mortgage
    Car – payment, upkeep, gas, etc.
    Insurance (health/medical, life, auto,
    home, et.)
    Food
    Household utilities
    Clothing
    Entertainment
    What Else is in a Budget?
    Student loan payments

    Insurance payments

    Entertainment (movies, books, magazines, toys, cable TV,


    Internet access)

    Income taxes in addition to those withheld from your paycheck

    Child care

    Medical bills

    Savings (transfers to savings account, retirement fund or


    brokerage account)

    Vacations
    Budget for Actual and
    Unexpected Expenses
    1. The FIRST step is to create and maintain an Emergency Fund.
    2. Initially the Emergency Fund should be $500 - $1, 000
    depending on your income and debt load.
    3. Eventually you need to increase this to 3-6 months worth of
    income.
    4. Develop the attitude that this is ONLY used for
    EMERGENCIES (unemployment, unexpected medical needs
    or any other financial crisis).
    5. Should you have to use money in this fund for an
    EMERGENCY the priority for the next month is to re-supply
    the fund.

    Remember Murphy always strikes!


    Budget Resources
    Use these resources for additional
    information:
    http://www.stats.bls.gov/news.release/cesan.toc.htm

    http://www.practicalmoneyskills.com

    http://consumerist.com/consumer/tools/the-zero-based-
    budget-300076.php
    Budgeting Terms
    Surplus occurs if you have a positive cash
    flow
    Deficit occurs if you have a negative cash
    flow
    Discretionary Income is the money you
    have left over after paying for essentials
    Discretionary Income is used to evaluate
    the strength of a person’s income
    Represents the money you can spend
    on wants
    Review & Evaluate

    Review on a monthly basis, especially when you begin


    the process.
    Evaluate the budget against your personal financial
    goals.
    All monthly deficits need to be addressed immediately
    All surplus experienced needs to be added to savings
    Consider operating on a cash envelope system
    Do not get discouraged.
    Practical Budgeting Tips
    • The budget must BALANCE
    – The income must equal the expenses. If you make,
    you must have a ‘destination ‘for that money!
    – That does NOT mean you MUST SPEND it. Planning
    to put money in some type of savings account is a
    GREAT idea.
    – The Income MUST EQUAL Expenses!!
    • Plan carefully
    – estimates should be based on some data
    – cover all expenses
    • Be practical
    • Be flexible
    • Write your budget down
    • Be able to access your budget data easily

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