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It’s that time of the year again… time to create next year’s budget. Budgeting in the best of times is difficult, and now it’s even more tricky with the uncertainty of the pandemic, political unrest, racial injustice, and more.
It’s time to take a new approach. So before you dive too deeply into the budget tar pit, here are my key takeaways from discussions with my executive coaching clients:
Rethink Budgeting To Focus On Outcomes. Why do we budget? The same reason we do any type of planning—it’s an attempt to control, predict, effectively allocate resources, maximize growth, profits and earnings per share, ensure stability and certainty…..Continue reading…
Source: How To Budget In Uncertain Times
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Critics:
The budget is a plan for the organisation’s expected outcomes during the period it covers. The budget includes both revenues and costs, but it can also include investments and cash flow. Budgeting also correlates with key performance indicators (KPIs) and goals set for various parts of the operation. Budgeting keeps your finances under control, shows when you need to make adjustments to your spending, and helps you decide where your money goes instead of wondering where it all went.
Budgeting helps you answer these important questions: Where does all my money go? Is there a way to spend less? Do not subtract other amounts that may be withheld or automatically deducted, like health insurance or retirement contributions. Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
A budget is a system that allows you to plan for your income and expenses over the course of a set period of time. For example, creating a monthly budget takes into account where your income and expenses will go for that month. For example, your budget might show that you spend $100 on clothes every month. You might decide you can spend $50 on clothes. You can use the rest of the money to pay bills or to save for something else.
In the 50/20/30 budget, 50% of your net income should go to your needs, 20% should go to savings, and 30% should go to your wants. If you’ve read the Essentials of Budgeting, you’re already familiar with the idea of wants and needs. This budget recommends a specific balance for your spending on wants and needs. At the most basic level, a budget is a way to keep track of the money you are getting and the money you are spending.
A budget is a great way to make sure that you can cover your expenses from month to month. Try the 50/30/20 rule as a simple budgeting framework. Allow up to 50% of your income for needs, including debt minimums. Leave 30% of your income for wants. Commit 20% of your income to savings and debt repayment beyond minimums. Well, a budget keeps you in the ‘know’ about how much money you have, how much money you’re saving, and/or how much you might be over-extending your resources.
In other words, budgeting puts you in charge of what you can afford and when you can afford it. A budget is a spending plan based on income and expenses. In other words, it’s an estimate of how much money you’ll make and spend over a certain period of time, such as a month or year. (Or, if you’re accounting for the incoming and outgoing money of everyone in your household, that’s a family budget.).
Budgeting control refers to the process a company uses to track actual spending against planned budgets. Not only does this help keep spending under control, but businesses are able to create more accurate budgets and maximize their profits. Budgeting is an ongoing activity in which revenues and expenses are managed to maintain fiscal (financial) responsibility and fiscal health. It is the process of planning and controlling future operations by comparing actual results with planned expectations.
A budget can help you reach your savings goals by giving you more control over your money. Without a solid sense of how much you spend compared to how much you earn, creating new, attainable goals can feel overwhelming or uncertain. But with a budget, you can plan ahead for how much you’ll set aside from each paycheck. One of the most popular budget methods is the 50/30/20 spending plan. With this budget, there are only three spending categories you’ll need to keep track of: 50% of your net income goes to needs.
Strategic budgeting is the use of multi-year planning and quantified results to achieve specific goals through the budgeting process. Traditional budgeting relies on incremental, line-item considerations when making budget decisions. A master budget is the central financial planning document that includes how a company will spend and how much it expects to earn in a fiscal year. A master budget contains budgets of departments within the organization and projections that allow for management to plan for the upcoming year.
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