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How to Review a Budget? Method and Examples

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Reviewing a budget

The budget is essential to keep the economy in order, whether it is a family or a business. Without this valuable tool, it is not possible to keep real control of expenses or to set medium or long term economic goals.

The budget is a tool that allows to estimate the expenses for the creation of a project that needs financing or to consider acquiring an expensive good that only can be made with the approach of a budget that helps to achieve the goal.

Once the budget is organized, it can be complex to have the discipline to fulfill it, so some indispensable steps are needed to achieve this.

The first thing is to set goals and priorities, so that criteria can be organized according to the budget, because it will not be difficult to follow the financial guidelines set out in the budget, reaching the desired goal in a more comfortable and feasible way.

It is also necessary to calculate the monthly salary income so that you know how much money you have in a fixed time to have what you need in time and the amount you can save after the indispensable expense such as services and basic need items.

If there is overtime income or any other income, it is better to take it out of the budget, as this income is not stable and will not be received in the same amount every month or week.

Then it is important to set goals, what you want to achieve and after how long, for example, the purchase of a vehicle or a house, the goal can be set in a month, a year or even three years, it all depends on the value of the financial goal and the possibility of getting the money budgeted.

The next step would be to calculate the expenses in detail, these imply the payment of services, food, medicine. In addition, if you have a bank account you should review your account statement, and if you have credit cards you should review your account expenses and the pace of payment.

In addition, you should also review the contract or modality in which the card is, being able to accumulate benefits for using the credit card.

However, you must be very careful with the contract of the card, because if you notice a rate of expenditure greater than the benefits obtained, it is better to close the credit card or not use it.

All of these steps are necessary to determine what your true income and expenses are, in addition to weighing the flexibility of your income and expenses in terms of eventualities such as the purchase of clothing, vehicle maintenance, payment of insurance to guarantee medical care, and other expenses that are made on a certain unforeseen date.

Once the previous steps have been determined, the budget is created and structured to organize the expenses and to be able to satisfy primary needs that are not negotiable, and then, with the surplus of money, to be able to determine its use.

Reviewing a budget

With the surplus money, it is recommended before saving for your financial goal, to create a personal emergency fund. Banks have modalities where they place the funds in a fixed term, to which you do not have access until a certain date, or only in case of emergency, where you with a concrete authorization, can have access to these finances, placing discipline to the expense.

Once this fund is large enough, you can schedule the financial goal, either the purchase of the desired vehicle or the acquisition of a flat or some item, leisure travel and other products and services available that can only be acquired with a solid foundation of money.

It is recommended that you review your proposed budget from time to time, so that you can verify whether you are meeting your goals or if there is any inconsistency with your economic or spending criteria. In addition, check if the plan satisfies it as it was proposed or if there are aspects where the initial plan is not as effective, so that the criteria or spending priorities can be changed.