budgeting Archives | Page 6 of 11

Balanced Budget: A Unique Balancing Act

DEFINITION

Balanced budget is a situation in financial planning wherein the revenue and expense columns of the working budget are equal.

Having a balanced budget occurs not only when the person’s total revenues equate to the total expenses but also when the total revenues exceed the total expenses within a full year. So even if the budget shows an outstanding lead on the revenue side of the balance sheet, it can still be called a balanced budget. Company’s operating budget for a forthcoming year can be termed balanced based on predictions or estimates.

An alternative to the annual balanced budget is the cyclically balanced budget. The cyclically balanced budget follows the economic cycle wherein the budget goes through the dynamics of surpluses and deficits. Theoretically, if the economy goes through the ups and downs, it should your budget should balance itself out.

COMPONENTS

The 5 components of a balanced budget are:

1. FIXED MONTHLY EXPENSES

These expenses remain the same every month or year due to Singapore’s laws and Company service-provider terms (e.g. Hand Phone Plan, or HDB Rent).

2. VARIABLE MONTHLY EXPENSES

These expenses include food, entertainment, clothing, petroleum, and other expenses that may change every month or year. The challenge now is for you to choose on which variable expenses you can reduce.

3. OCCASIONAL EXPENSES

Occasional expenses happen a few times a year. This includes holiday vacations and seasonal gifts.

4. INCOME AFTER TAXES

Your monthly income after taxes is the amount of money that you have to work with within the month. This amount varies depending on a person’s career. Use your annual income to guide you while making your budget

5. SAVINGS

Savings is a portion of your budget that you keep for future use. It includes emergency fund and retirement fund as it helps you to reach your financial goals.

NEXT STEP

To attain a balanced budget, you must first know about the basics of keeping one. May this short video help you with that:

Sources: 1,2 & 3

Creating A Budget Is Like Learning How To Ride A Bike

Creating a budget for the first time is like learning how to ride a bicycle. At first you were scared to mount up those two-wheelers like how scared you were to conquer those mountain of debts. Even though you know these are healthy for you and your finances, you just cannot hop around and go!

That fear of yours consumed you. You never learned how to ride a bike gracefully. You never learned how to implement a budget efficiently.

Don’t you think it is the right time to change? For a brighter future ahead, I think it is!

Let me carefully take you to step 1…

Step 1: LOOK FOR A SAFE PLACE TO PRACTICE

When you are riding a bike for the first few times, it is better to find a place that will cushion your potential falls. Find a grassy field with short grasses so that it does not drag the wheels too much.

Likewise, you must find safe place to practice budgeting. That safe place is inside your head! Visualize your financial goals and examine how you are going to achieve them. Make it feasible and smart so you would not have too much unrealistic expectation. Then, list down your short-term and long-term financial goals.

Step 2: ENSURE THAT YOU HAVE ALL THE NECESSARY RESOURCES

After finding a “safe” place, the next things you have to gather are all the needed materials and information. For beginners in biking, consider strapping a helmet and kneepads. Tuck in your shoelaces while you are it. And avoid long pants, long skirts, and heavy clothing because the fabric can get caught in the gears or tires.

For beginners in budgeting, consider tracking your spending history (for the last two month). Gather all the past receipts, credit card statement, utilities bill, and bank statements. Estimate how much you make and spend each month.

Step 3: PRACTICE AND JUST DO IT

In order for you to practice riding or budgeting, you must push yourself to just do it. Mount the bike and get the feel of how it leans and steers. Notice how your body leans when you are going intro a curve. Instead of just using your hands to brave the curve, try letting your body turn and the bike will follow.

This will help you learn an important biking skill – balancing.

Now that you know your income and expenses per month, it is time to make a plan. Categorize your spending into 2-3 main categories namely: needs, savings, and wants. Learnvest suggests allocating 50% of your budget to your basic needs such as rent, food, transportation, and utilities. Secondly, 20% of your budget will go to your savings such as emergency fund. The last 30% of your budget will go to your wants such as mobile phone plans, gym memberships, and vacations.

This will help you learn an important budgeting skill – organizing.

Step 4: GET READY TO RIDE AND SAVE

From finding your safe place to pushing yourself to do it, the final step to take is to face your fears.

Ride that shiny bicycle! Follow that well-devised budgeting plan!

Raise the seat of your bike but keep it low enough so that you can touch the ground with your toes. Balance and steer along the flat surface. Glide along the gentle slopes. Allow yourself to go naturally with the flow of the road.

On the other hand, you must follow your budgeting plan that you devised on spreadsheet file or budgeting software. Track your spending and eliminate at least two unnecessary expenses every month. By doing so, you are keeping things under control.

Image Credits: pixabay.com (License: CC0 Public Domain)

Over the course of the month, you will encounter slopes and obstacles but you have to persevere on. It will all be worth it in the end!

Sources: 1, 2, & 3

Shameful Reasons Why You Keep Breaking Your Budget

Budgeting, a quantitative plan to manage your money, has many benefits such as tracking your cash flow, controlling your expenses, and reaching your goals! However, some people find it easier to break their budget than to follow it.

Fortunately, you can do something about it. Be aware of the despicable reasons why you keep breaking your budget then, take the necessary steps to turn things around.

1. YOU MAKE EXCUSES THAT BUDGETING IS TOO COMPLEX.

There is no need to fear because budgeting is easier than you think! And, it is rewarding too. For example, if you want to splurge on a weekend vacation, all you have to do is plan ahead. That way, you would not have to create credit.

A simple budgeting method that you can try is the envelope budgeting. It only takes three steps to complete! Begin with tracking your monthly spending patterns then, devise a budget plan including different expense categories. Lastly, you must allocate your cash inside separate envelopes.

Watch this short video tutorial of the envelope budgeting to know more:

2. YOU ALWAYS SPEND A HUGE SUM OF MONEY.

The truth is, you cannot have unlimited supply of money. Even the amount of digital currency such as Bitcoins are controlled. This is why you must spend within your means.

Overspending is one of your budget’s enemies. If you want a comfortable present and a brighter tomorrow, you must stick to your budget and cut down your expenses before saving up. Start by minimizing your household expenses with these simple tips.

3. YOU FORGET IMPORTANT DEADLINES.

Another opponent that challenges your budget are unexpected bills. You will never follow your budget if you keep forgetting your irregular bills such as your yearly magazine subscriptions. Avoid this by making a list of the bills you are expecting to receive every month.

Never forget where you put the bills or what their due dates are by designating one place for them. Some bills arrive by electronic mail while some arrive by postal mail. You have to decide whether you are going to file all your bills in a tangible box or in a computer folder. For physical storage of bills, you may purchase the S$0.90 PAPPIS brown box from IKEA that is created to hold A4 size papers. Label the box accordingly and keep it in a safe place. While for virtual storage of bills, make scanned copies of those that arrive in the mail and put them into a labeled folder in your computer or laptop.

4. YOU ARE ECONOMICALLY UNINFORMED.

Most people want to improve their financial life but know nothing about how economics works. Thus, they make errors in creating and maintaining their budgets.

Economy is defined as the careful management of resources (e.g., household management). While, manage is defined as the act of succeeding in surviving especially against heavy odds. Learn more about the important terms, history of money, and its humanistic systems by watching at least two of the Best Economics Documentaries For Finance Professionals And Enthusiasts.

Image Credits: pixabay.com (License: CC0 Public Domain)

Sources: 1 & 2

6 Simple Ways To Organize Your Finances Now

In a sea of bills and taxes, its huge waves may drown one. Building a strong money boat to hold you and your finances together through organization is the key. Organizing your personal finances enables you to save more money and time. Start with these simple ways:

1. KEEP TRACK OF YOUR FINANCES DIGITALLY

Firstly, you must be aware of your spending patterns and exactly how much you are spending per month and per annum. A surefire way to organize your personal finances is to keep track of it by using a Smartphone App or computer software. Find the perfect (and Free) money management app for you here. Or, download reliable money management software called Money Dance or Mint. These digital tools will help you decide how much you shall save and help you to highlight the unnecessary expenses.

2. DESIGNATE A PLACE FOR BILLS

3. PREPARE FOR YOUR BILLS

At the beginning of the month, make a list of the bills you are expecting to receive. Put it on your working desk or create a file for it. This way, you will not pay a bill twice even if you received it simultaneously by e-mail and postal mail.

4. PAY THE BILLS IMMEDIATELY

Always charged for late payment? Try paying bills immediately. Since you are prepared for the bills earlier on, you may have available money in the bank to pay it the same day as you received it. If you have automatic payment scheduled and you still received a billing statement, call your bank or creditor.

5. CUT DOWN THE NUMBER OF YOUR FINANCIAL ACCOUNTS

In a world filled with a certain bank account card for all your needs, most people have several number of financial accounts. The complication starts when the credit card for travel, for petrol, and for shopping bills at the same time. Also, you may have different bank accounts for higher interest, minimal fees, and rebates. More than being complicated, the constant shuffling between these accounts can get messy. This is why you must reduce the number of your accounts.

6. SET REALISTIC FINANCIAL GOALS

Develop a habit of financial goal setting to know where you are going and to plan how you can get there. Write down your financial goals with a trusted witness and contemplate the monetary milestone you would like to accomplish in the next 2 to 5 years. Track down your monthly progress.

Image Credits: pixabay.com (License: CC0 Public Domain)

Sources: 1 & 2

5 Ways To Budget Your Start-Up Business Like A Boss

There comes a time when your lack of skills on accounting and budgeting will be a dilemma once you opened your small business. You may be knowledgeable in sales and trading but budgeting is important too. Budgeting helps the business owner to determine whether hey have sufficient money to fund the operations, expand the small business, and generate profit for oneself. Without this, you may spend more than what you earn.

The good news is that, there are modern alternatives to make your budgeting feast quicker and easier such as using Smartphone Apps that highlight your business’ expenses. And, on that note, here are the 5 Ways To Budget Your Start-Up Business Like A Boss…

1. DO TONS OF RESEARCH

Businesses may not be diverse but there are similarities. So, do tons of research on the local library, online forums, and start-up business owners about their company’s budget and financial plan. Use a platform like Quora or Yahoo Answers to enable you to ask the users on certain prices of the materials you must use or where to buy them. This will ensure that you get the best deal without spending too much.

2. ORGANIZE THE NUMBERS

After doing your research, organize the numbers by putting it inside an Excel spreadsheet. Analyze and estimate the total amount of money you must allocate on different categories such as raw materials, rent, insurance, and taxes. You may also put the estimated percentage of revenue for each category.

3. USE A SOFTWARE

Aside from using an Excel spreadsheet, you may budget like a pro by using accounting software called inDinero. inDinero helps you run the small business better as it safeguards your transactions, your cash flow, and your expenses. It connects the bank accounts so you can visualize where your money goes. Furthermore, it helps you with your payrolls and taxes. You can also outsource your accounting tasks with company that is willing to provide cloud accounting service such as Quickbooks or Xero for a fraction of the cost.

4. REMOVE THE UNNECESSARY

Upon analyzing your cash flow and expenses, consider cutting the costs of the things that are unnecessary. Save more by taking advantage of the payment terms offered by the supplier or by purchasing on the start of a new billing cycle.

5. BE READY FOR THE WORST

Most of the expenses, such as office supplies and salary costs, are predictable. But some unforeseen things such as higher petrol prices may happen that will spike up your expenses for that month. This is why it is important to be ready for the worst. Do not let these unfortunate events stress you or put you in debt.

Image Credits: John O’Nolan via Flickr with Creative Commons License

Sources: 1 & 2

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