Planning a budget
The ups and downs of the economy make businesses and consumers try to get their finances going, having a budget that really works which is more important than ever.
The key to planning a budget is to understand the different budget strategies and find out which one is the most appropriate. It is also vital to realize that this process is not always easy; it requires effort, intelligence and perseverance.
Here are some things that can help you plan a budget in the most appropriate way.
Basing income and expenses on reality
You should start by making a list of everything you have spent in the last 3 months. This may take a little extra time, but just listing expenses and income from a month ago does not allow you to see the full picture. You may forget about transactions that are only done quarterly, in the case of the family budget for example, the car oil change, or income bonuses at work. Except that, this idea is also valid for companies.
You need to be honest with yourself so you don’t leave anything out. Therefore, if you want your budget plan to be as accurate as possible, you need to make sure that you are really sticking to your monthly spending goals. To do this, you must base your budget on reality using the correct figures.
Choose a plan that is customized or that fits your business
There are multiple types of budgets and spending plans, so choosing the right one is important. You may need to try it out for a couple of months to see if the type you choose works best for your family or business.
Some of the better known models are:
The so-called 50/30/20 rule. This rule divides spending habits into three categories with certain percentages. This rule divides spending habits into three categories with certain percentages. Based on income, essential expenses such as utilities, food and rent make up 50% of expenses. Unnecessary expenses such as cable, internet, cell phone, make up 30% of the budget, and future goals such as debt repayment, savings, retirement fund, make up the rest, or 20%.
The fixed and variable expense budget model. This method divides the budget into two categories, fixed and variable expenses. You can only reduce the payment of fixed expenses, such as car insurance, and the mortgage payment, to a certain extent, but food and entertainment expenses fall into discretionary expenses, which can be cut back if necessary.
Budgeting for the minima. This is a budget based on the lowest possible monthly income. If you are self-employed or working on a commission basis, this type of plan will be best suited to a user in this condition. Creating a plan based on the absolute needs that are required to survive, with any other money seen as a complement.
Finding a method to track the budget
This step is carried out when you have calculated the expenses, and you have clear the income, dividing the budget in a plan that works according to the specific situation, deciding when you are going to do the follow-up of the whole budget every month.
If you’re a technology expert, you may prefer to track your daily expenses in a mobile application. Also, you may prefer to carry a small notepad and pen to quickly record transactions. However, some better options are suggested:
-the completely free web-based service and the mobile app.
-Having a desktop budget software.
-Use the free monthly budget templates from Microsoft that can be easily downloaded.
Again, you may need to try out some different online tools, or spreadsheet templates, but once you find the one that works, you are advised to stick with it.
Planning a budget that works
If you are trying to get the best method for planning a budget that works, it is important to keep it in the long run and not get discouraged if it doesn’t work very well during the first few months, because it takes time to create new spending habits, and to level out as income fluctuates.
Also, experiment without fear of trying different methods, tools and resources to plan a budget, because as circumstances change and the dynamics of the business or family evolve, you may find that one style or method no longer works, and it’s time to try new ones.