Budgeting

When you hear the word "budget," do you think "Ugghh!"? If you would rather do just about anything besides create a budget, you're not alone. The word "budget" brings up connotations of endless numbers, constraints, the opposite of freedom and creativity, and hard work, none of which are very desirable.

Yet, the benefits of a budget are huge. Budgets can help you with cash flow improvements, keep you on track for higher profits, and alert you to items that need further action.

Shift From "Budget" to "Profit Plan"

Instead of thinking of all the negative connotations often associated with "budgeting" how about renaming it to "profit planning." Rather than focus on how little you should spend, start with how much revenue you're going to make! Then look at the expense side of your "profit plan" as protecting your profit margins so that you can ensure financial gain from all the hard work you do. Setting budget limits on spending will allow you to control overhead and other items so you can keep more of what you make.

Use QuickBooks Budget Tools

Use QuickBooks to help you. Click on Company > Planning & Budgeting> Set Up Budgets. If you've already set up a budget, that one will appear. You'll be able to edit it or create a new one.

Select Profit and Loss to include all of the previous year's activity and click Next.

On the next screen, you can include criteria, (Customer:Job or Class),so you can budget for individual customers/jobs or classes instead of by account only. Leave this box unchecked for now. Click Next.

Determining the Content

Indicate whether you want to start from scratch with your own figures or let QuickBooks pre-populate your budget with last year's numbers. Click Create budget from scratch then Finish.

You can decide if you want to have the same amount for each month, such as rent, or if you want to vary the amount by time of year (income and payroll fluctuate seasonally for many contractors and retailers). While you can't enter a total and ask QuickBooks to divide it across the months, there are some fast ways to get some numbers entered and QuickBooks will total for you.

• When you click in the cell that has a number you want to use for each month, use Copy Across. Guaranteed to be faster than you! You might have the first few months using one amount, (e.g. perhaps you know you have a rent or insurance increase coming on a renewal month), then you can copy the new number across.
• Perhaps you expect sales to go up a certain amount each month. When you click on Adjust Row Amounts, you can either use the 1st month or click in a specific cell and go from there. You can adjust up or down, by percent or dollar amount.

Of course, the real power of QuickBooks budgets lies in its budget reports. Using these, you can get an instant, insightful look at how your income and expenses are performing. You can compare budget to actual, or better yet, just be alerted to the accounts showing exceptions.

Go to Reports | Budgets and Forecasts to find them. They include Budget Overview, Budget vs. Actual, and Profit & Loss Budget Performance. Once the report runs, you can change from monthly to some other time parameter if desired. The Performance report lets you see not only how you are doing.

A "profit plan" is a great tool for your business.

Rules. No-one likes rules. But we all realize that if we didn't follow traffic rules and stop at a red light, our streets would be chaos. If you want to have a successful personal budget, you have to follow the rules (in this case one simple rule).

Many people believe that there are a lot of rules to follow when making a personal budget. People believe you must work on your budget every day, and keep track of every penny you spend, or else your budget won't work. Most people think budgets are a lot of work.

Most people also believe that budgets are hard. They think you need to be an accountant to be able to create and maintain a personal budget.

Budgets can be a lot of work, but they don't need to be, if you follow the First Rule of Making a Personal Budget: Keep it Simple. Yes, like a lot of things in life, the KISS rule applies to your personal budget.

Don't try to create a complicated series of linked spreadsheets with fancy graphs and tables. Don't try to master the most complicated personal budgeting software. Don't believe that you have to go to school and study bookkeeping and accounting to make your budget work for you. Keep it simple.

Start with a blank piece of paper, or a blank spreadsheet, and make a list of what you spend money on every month. That's right, you are not making a budget; you are making a list - how easy is that?

Most people can't even make a list of what they spend each month, because they have no idea what they spend their money on. No problem. Keep it simple. Get a pencil and a piece of paper, and carry them with you everywhere. Whenever you spend money, write in down. At the end of a normal week, you will have a good idea of where you spend your money.

You could then take your week's worth of notes and make a monthly budget. But, to make your budget even simpler, do a separate budget for every pay check, or make a separate column on your spreadsheet for every paycheck. That means if you get paid every week, have a column for every week.

Then, make a plan for how you will spend every paycheck. It's much simpler to decide how to spend your paycheck this week than it is to try to budget for the next six months.

Read that sentence again: make a plan for how you will spend your money. That's the only reason for making a budget. By keeping track of where your money goes, you can make a plan to spend your money where you want to spend it.

If you keep it simple, your budget will be a success. And remember, if you don't follow this simple rule, your personal finances will be a mess, and you could have to declare personal bankruptcy. So keep it simple, because proper budgeting is the best personal bankruptcy alternative.

Planning For Success In Your Business

Do you feel like running from the room screaming when someone says, "Where's your budget?" Or what about "How much did you budget for that?"

Most people hate the idea of a budget. These are the people who have never had one. They feel that a budget is too confining and that it's something to avoid. Well, if that's you and you want to succeed in business - get over it! A budget actually puts you in control of the money you work so hard for and of your financial future.

First, adjust your thinking. Instead of seeing a budget as a restriction as to what you can do, see it as a tool for helping you plan to do as much or even more than you thought possible before. It's important to remember that a monthly budget isn't a hard and fast system that you have to follow rigidly. Many people avoid creating a budget because they feel it is too restrictive. The truth is that a budget is liberating. It's a plan that grows and adapts with you as your needs change.

When it comes to business, your monthly business budget forms the foundation of all of your business finances. Keeping a monthly budget make it easier to plan; stay out of debt; contract with the right people and services; make solid business decisions; and best of all, get and stay profitable.

There are a few simple steps to create your monthly budget plan.

Step 1: Choose The Planning Tool Right For You

Do you prefer to simply sit down with pen and paper? Check your local office supply store for simple accounting notebooks.

Prefer using a computer? Use a word processing or spreadsheet application. I always prefer Excel when it comes to numbers as it is much easier to automate calculations in Excel than in Word tables.

Think you'd prefer to use a small business accounting program, but don't have the cash to invest at the moment? Do a quick Google search for "best free small business accounting software" to find one. Most programs have a budgeting feature.

Step 2: Determine Your Income Sources

Income is generally the first category for any accounting system. Think outside the box for a moment and think of all the ways you can make money. For instance, if you are working in information marketing you might have sales, commissions, affiliate marketing, etc. If you are still uncertain of all the ways you make money, take a look at the monthly statement from your bank or payment processor (such as PayPal). Look at where your money comes from and categorize it.

Put your income sources in a table of some kind. Make it five columns wide. The first column contains your income sources. Column 2 is what you actually made; name it "Actual." Title column 3, "Budgeted." In this column put in how much you thought you'd make that month. The budgeted column is what you use when determining your expense budget. More on that later...

Your fourth and fifth column are "Over Budget" and "Under Budget." As you might guess Over Budget is how much you earn over what you budgeted and budgeted to earn and Under Budget is for how much under your budged income you came. Obviously, you'll only fill in one of these two columns for each income category each month.

Step 3: List Your Monthly Expenses

Since some things you need to put into your monthly expenses come only once a year, you'll need to think in terms of all expenses. For example, you may only pay for your website hosting once a year, but you need to account for it some way. Take the total of any item you pay for only once a year and divide by 12 to come up with your monthly expense for that item.

Reviewing your bank statements can help you figure out your regular expenses. If you're just getting started in business and aren't sure, make some guesses. Remember, it's always better to overestimate your expenses than to underestimate them.

Make another 5-column table. In the first column list your expenses by category and sub-category. For example, under the category Sales Expenses, you might have sub-categories of Affiliate Commissions, Advertising, and Shipping & Delivery. Under each category put the total for that category and save space for "Percent of Total." You'll figure out the percent of total later.

Now about that percent of total space...

This is useful planning data. Looking at these percentages you can easily see where you might be overspending by category. This helps you to know where to adjust your expenses when needed.

Just like with income the Actual, Budgeted, Over Budget, and Under Budget columns.

Step 3: Take Time For Your Monthly Summary

Once you have this all set up, set a time on your schedule at the end of each month to review all of the information to see how well you anticipated and planned. This information will help you create the next month's budget.

The basic formula you are working with is Income - Expenses = Profit. So, at the end of the month put a line at the top or bottom of your summary have another table that shows those figures along with the columns for actual, budgeted, over budget and under budget. Now a quick glance tells you how you did that month.

Step 4: Put Your Monthly Budgeting Plan into Action

Like with any plan, it is only good if you use it. To put your Monthly Budget Plan to use you'll need to create a system to keep your income and expenses organized. Decide whether you are going to add up your income and expenses daily or weekly and then stick with that plan. Whether daily or weekly, enter it as an appointment with yourself in your calendar.

You'll need to keep track of all invoices and receipts. Here's one way to do it. Staple the day's or week's expense receipts to one piece of paper with the total written. Take a second sheet of paper and do the same with the invoices. That way, when you sit down at the end of the month to review your budget and plan for the next month, you'll have all of the information readily available.

The first few months you may be off by quite a bit. However, as you learn to predict and anticipate income and expenses your budget will gain accuracy. Once you see just where your money is coming from and where it is going over time, you can make adjustments to it to meet your business needs.

A Modest Proposal for a Balanced Budget Amendment

"The debt is like a cancer [that is] truly going to destroy the country from within."

-Erskine Bowles, 2010

Most have heard, with ever increasing volume, the debate over the U.S. Government's budget deficit. While the majority of Americans according to polls agree there is a deficit problem, most do not realize what the implications of running long-term budget deficits and accumulating a significant debt burden are. To put our current budget deficit problem in perspective, a June 2011 budget review indicated we borrow 41 cents for every dollar we spend (Congressional Budget Office (CBO), 2011, p.1). As of June 3rd, 2013, the national debt was $16.7 trillion and projections estimate by 2035 the national debt to "equal about 80%" of the economy's total annual output or Gross Domestic Product (GDP), which would be the highest percentage in U.S. history except for the period directly after WWII (CBO, July 27th 2010,p.3). Does our current government debt matter? Running sizeable long-term deficits will impact our children in a number of ways. If spending at current levels continues, the resulting debt burden will result in economic hardship and potentially higher taxes for future generations, which in essence constitutes generational theft. Our excess today will ultimately have to be paid by our children tomorrow. One way in which we can ensure a mechanism is in place to halt running budget deficits and instill fiscal discipline in our federal government would be the adoption of a Balanced Budget Amendment.

Before one can really argue for a Balanced Budget Amendment, one has to articulate the potential consequence of accumulating large debt burdens. Alan Greenspan "argued that paying down the national debt is beneficial for the economy: it keeps interest rates lower than they otherwise would be and frees savings to finance increases in the capital stock, thereby boosting productivity and real incomes" (Greenspan, April 27, 2001). If Alan Greenspan's argument is true, one could rephrase his argument in the alternative by suggesting increasing government debt is not beneficial for the economy: it keeps interest rates higher than they otherwise would be and restricts savings to finance increases in capital stock, thereby decreasing productivity and real incomes. The Congressional Budget Office has echoed that premise by stating the impacts of the current growing deficit and the forecasted future debt if left as is will reduce savings, increase interest rates, and lower income growth (CBO, 2010, summary-p.11). By running long-term budget deficits and accumulating significant debt relative to the economy's overall output or Gross Domestic Product (GDP), the U.S. government will have to raise future taxes or curb spending through various austerity measures.

What will be the potential future impacts of drastically higher taxes? Depending on how the higher taxes are levied to combat a significant debt burden relative to GDP, higher taxes may lead to higher interest rates, lower real incomes, decreased capital investment, and even impact our ability to compete internationally as it relates to trade. Significantly higher taxes could induce or prolong periods of stagnation, recession, or even depression. What if our federal government does not have the option of raising taxes because of future dismal economic conditions and cannot borrow more money because investors will no longer lend? The unthinkable could possibly come true and our federal government would default; thereby and with some certainty, send the U.S. economy into a depression. While the level of restriction to economic growth is difficult to measure with any accuracy, a strong argument can be made that taxes will increase substantially for future generations to pay for our excess if spending continues unchecked. Another option would be severe austerity measures. Given the polarity that exists today between both political parties, it is foreseeable to conclude they will not be able to agree where cuts to the budget will be made.

After debate, both parties may agree to sequestration and automatic across the board cuts, which could potentially have devastating impacts and even compromise national security. If we can conclude with certainty our continued excessive spending today will lead to some level of economic hardship for our children tomorrow, there is a moral issue at hand. Who will ultimately be impacted? Our children and our grandchildren will have to pay for our excessive spending tomorrow. In essence, we, through our elected officials, are making a conscience decision to kick that can of austerity down the road to our children.

If we wish to avoid the criminal act of generational theft, our spending needs to be curbed. Although a substantial portion or our debt woes can be associated with the recent recession, there is no excuse to continue the unchecked deficit spending going on today. Social welfare programs such as Medicare and Social Security should both be revamped by increasing the retirement age or decreasing the level of benefits to ensure the solvency and viability of those programs in both the short-term for the baby boom generation and for their children and grandchildren in the long-term. Another area to consider reforming would be pork barrel spending. While every legislator wants federal tax dollars allocated towards his or her district, procuring votes from officials by allocating federal tax dollars, which should be their own state's tax dollars, for programs within a respective legislator's district or state constitutes nothing short of bribery.

A safeguard, such as a line-item veto, needs to be implemented to ensure votes are not being bought and sold with tax dollars. Another area for consideration would be the U.S. Military. For National Security, our Military needs to be prepared to not only fight a conventional war, but also to continue to fight the war on terrorism. While our Military should be the best compensated, the best trained, and the best equipped in the world, the focus for budget purposes should be on eliminating excess without compromising overall capability. The list of austerity measures could go on and on, but reforming social welfare programs, eliminating pork barrel spending, and eliminating waste in the Military should yield the substantial savings needed to balance the budget. A Balanced Budget Amendment would force legislators to take on and face these needed budget cuts without simply borrowing more.

In any case, there is really no question as to what will happen in the long-term by running a balanced budget. While there will be a shared sense of pain initially, a Balanced Budget Amendment would instill fiscal discipline within our federal government by ensuring our elected officials only spend what they have coming in. Moreover, this would be the first significant step to paying down our national debt and ensure our elected officials deal with the challenges of the day versus continually kicking the can down the road. A Balanced Budget Amendment would potentially open the door to lowering overall taxes when the debt is paid down; thereby, increasing the personal wealth and prosperity of our children. If we make the decision now to pay for our own excess, we will create a better life for our children tomorrow. We need to have a nimble government that can expand or contract based on the needs of the day with a mindset to continually increase the prosperity for future generations. There may be situations, especially during times of war, where there is a need to run a budget deficit and to accumulate burdensome debt. If there is a need, there could be a stipulation in the Balanced Budget Amendment in which a two-thirds majority vote would allow deficit spending. In the end, instilling fiscal discipline and responsibility within our federal government will ensure our country remains that shining city on a hill.

"The fore horse of this frightful team is public debt. Taxation follow that, and in its turn wretchedness and oppression."

-Thomas Jefferson, letter to Samuel Kerchival

Douglas O'Coyne Jr., MBA

Sources:

Congressional Budget Office (CBO), Monthly Budget Review, June 7th 2011.

Congressional Budget Office (CBO), Federal Debt and the Risk of a Fiscal Crisis, July 27th 2010.

Congressional Budget Office (CBO), The Budget and Economic Outlook: Fiscal Years 2010 to 2020, June 2010 (Revised August 2010).

I see too many times where a template or boiler plate for a family budget is used incorrectly. Taking some form and putting in your figures and coming out with results is not a budget. It is simply posting what you made and how your spent it. This is not a good idea to start with.

Start by first using your "net" income or average your income over the last twelve months. If you are on a commission basis you will need to average, if you are on a straight base pay (exclude bonuses) then add up the net and divide that by twelve months. This will give you the first line item in your budget call it "Revenue."Now you have to do some digging, you must look at what is spent during the past year.

The basic budget will include:

• Rent/Mortgage
• Insurance (Do not include contributions at work)
• Utilities (gas, water, heating and air conditioning)
• Telephone
• Internet or cable bundle
• Food/Hygiene/Household Products
• Clothing
• Education or training expenses
• Auto payments
• Transportation costs (if you take a bus or train to work or shopping)
• Car Repair and Maintenance
• Gas
• Credit Cards/Other Debt
• Savings

Now you will have the basic structure of these items, but there is still some more work that has to be done.

You will need to lay out a format for your budget, five columns will be necessary. They are the line item in the first column, title that column as Item. The second column will be Budget Amount, the next column will be Percentage, the next column will be Actual and final is Variance.

The first two columns budget and percentage is what we will work on first. Later you will start to fill in the balance of the columns.

The first thing is to place savings at the top of your list. If you have savings take a look at it and see how much is currently in there. Only take into consideration what you saved in the last year. Take your average yearly savings and divide it by your net income. This will give you a percentage of savings against your net income.

Example: Saving $ 1200.00 / net Income $ 35,000.00 = 3.4% then divide it by the twelve months.

Do not get stuck on this right now, just take the figure and lay it out as it is. We will work this out later.

Under the title of Budget you will have this so far:

Budget Percentage
Income 2,920 100%
Savings 100 3.4%

The next thing to do is to post your rent/mortgage monthly payment. If you are paying mortgage you must break it out to principle and interest.

Rent 800 27.3% or
Mortgage 400 13.7%
Interest 600 21.0%

It will make a big difference in your view if you know the breakdown of Mortgage and Interest plus any other fees.

I am just showing here how to calculate your opening budget. On the mortgage end of things you will obviously be including real estate taxes and any other maintenance data that you gathered from the prior year. All elements of expense are important.

Now for those who tithe you have to place that on the budget as well. There are arguments as to whether or not the allocation should occur from the gross pay or net pay. Well that is up to what your budget and your conscience settles on and is comfortable with. Most churches argue that you must tithe from the gross, but if that is too much so that it harms your financial future than maybe it most come from your net.

Then again, in some cases neither situation is tenable. You have to go to what dictates and allows for your financial future. Some people can give a lot more and other well ten or twenty bucks might be all they can really give. This is always a personal choice.
So now let us get back to the budget allocation. Let us say you saved in the month of January only fifty dollars, you will show a variance of fifty dollars. Now fifty dollars just doesn't disappear, that money was spent somewhere. If you look at your entertainment item you find that you spent fifty dollars more than you should have.

Item Budget Percentage Actual Variance
Savings 100.00 3.40 50.00 (50.00)
Entertainment 25.00 0.08 75.00 50.00

This is where you would start, now if you have more expenses than you have income that would generate a percentage over one hundred percent. Now, if you have the situation that reflects more than one hundred percent the only way to correct that is to reduce costs from other areas. Maybe you may want to reduce your costs on clothing. You could look at your credit card payments and pay a bit more into that to reduce the minimum charges.

You have options once you understand your pattern of expense. In some cases, you realize that you should not have your credit card on hand every time you leave the house. One true test of impulse buying is to take a look around your home and see if you spent money on something you don't use regularly or ever. If this is so, then your only option is to stash the card away or tear it up and don't use it, until your impulse is put to rest. If you also look around and can't figure out where you spent all that money, take a look at your statements and break those down.

This of course is just a view in the rear view mirror. This is money that has already been spent. The best thing is that now you can look into the present month and gather that data and see how it compares to your past. Once you see what you have already average in the past year, now wait till the end of the next month and post that to the budget and see what you come up with.

One thing to realize a negative can be good or bad. In the example above you will notice that savings has gone down. That is not good; one is spending the savings money elsewhere. From a preliminary look you can see that entertainment expenses went up. This kind of spending can and will severely impact your savings and should raise the red flag.

Certain expenses will vary a little each month and seasonally as in utilities due to the change in climate. You can save money on certain items such as phone or food items by using the phone less or using coupons for food purchases etc. If you subscribe to a lot of different magazines you may want to pick only one or two and forget the rest.

One has to take a good look at all spending patterns to see if there are some things that can be avoided or that need to be done away with altogether. Now, we take the time to figure how to save money on these different items and implement the new spending plan.
Once this is done then we can straighten out what was heading into the disaster zone to something better. Let us say we took action and by doing just some little changes we now are looking better.

With some discipline and future prospective, we can change from where we are to where we are going. One caveat, don't try to conquer Rome in a day, that type of strategy usually never works.

In order to create a future budget, you will need to master the current budget. We start with a budget based on the past year. The next step is to see where you stand on a current month. Then in comparing the two, you draft your plan to turn your budget into a surplus.

Once you have your monthly budget under control, now you can look into the future and set aside for other things, such as new car, investments, a down payment for a new home, retirement, a better apartment etc.

Savings gives one purchasing power. Now we are looking at what transpires month by month. We do need to look at the coming year or years in full as well. You will need to determine how much you want to see in your savings at the end of the year. You may decide that you want to double up on your car payment for a few months to accelerate payment on that note, which in turn will save you money. You might want to look at some other financing that will allow you to pay off any encumbrances at a lower interest rate.

This budget is just an example, it could be that you have so much debt that you main goal is to pay off the debt as fast as possible. To confront where you are financially is very important. If you don't know where you stand, you will fail for sure. Should you carry this out each month you will know where you stand and be in control of the present and future.

It is my hope that this series regarding the family budget has stirred some fiscal responsibility on a personal level. Futures are not built nor designed in a day, but they are in fact incremental.

Most companies don't use budgets to help them meet profit goals. Why? Well, most owners and CEOs reason that the effort required to learn how to build and use workable budgets is just too much. They seem to feel that learning how to budget is more frustrating than just hoping the numbers will all work out-if they only sell enough widgets or services or whatever.

The fact is, however, that budgeting is the most effective way to consistently meet profit targets and avoid costly surprises. Budgeting helps you invest your resources to your company's best advantage-based on careful consideration, rather than the urgency to make some kind of move today.

Owners and CEOs need to begin controlling the bottom line with some of the same tools they use to control the top line, and budgeting is the first step. Consider these eight tips to help you become a better budgeter:

1. Take the time to do it right. A budget is not a sales forecast you put together on the weekend to impress your banker. It must be the result of coordinated input and effort by you and your top management team. That makes budgeting a project that requires some time and thought, just like any other project your company takes on.

2. Practice, practice, practice. Regardless of how tough it may be to estimate the future, your forecasting accuracy will improve, and you'll be better able to control the results, if you actively use a budget. Practice does make (almost) perfect.

3. Don't think your company is the exception. Any business can be budgeted. The only question is how much practice it takes to strike a balance between the time invested and your forecasting accuracy. Remember that a startup business has to be forecasted and budgeted in order to get financial backing. This includes companies trying to do something that's never been done before.

4. Use a Gantt chart. This is an expanded timeline to track deliverable dates for budget completion. It will tell you if you've scheduled too much to be completed in too short a time given other business activities that also require your team's participation.

5. Don't try to budget to the last penny. Predicting exact results down to the penny is not the objective. Rather, budgeting is more about giving your employees a direction to use for course corrections at a level of detail where it matters. If you try to forecast every last expense, regardless of how small, the details will drive you crazy.

6. Make the tradeoffs when necessary. You have finite resources available to you. If you must spend money for something you didn't budget, decide what budgeted expenses can be removed to "finance" the new item. Without this discipline, you will almost always overspend-because there are always good reasons to spend money. They don't always produce more profit, however.

7. Set both profit and cash flow targets. These two measures are very different and require different kinds of measurement and monitoring to prevent unpleasant surprises. Don't believe me? Keep in mind that every year businesses with great profits fail due to a lack of cash.

8. Ask three questions to analyze the results. With budget comparisons in hand, ask your team these three questions at the end of every month:

- How are we doing compared to the budget? If results differ from the plan, why did this happen?

- What must we do now to have a better result next month? How can we keep the positive differences and avoid more of the negative ones?

- What are we learning that will help make next year's budget better?

By following these tips, your income statement will be more informative, your bottom line more appealing, and your peace of mind more comforting.

BUDGET CRISIS - FOLLOW-UP 10-24-11

---The Federal Budget is morbidly obese, and "gaining weight" every day.---

INTRODUCTION

This is my second attempt to shed some light on the very murkey process used to approve the US budget. The crisis relates to the inability to reduce the deficit. It might be helpful for you to read the first blog entry before reading this one.

The Federal Government's inability to eliminate the deficit means that the national debt continues to increase daily. The only way the deficit can be reduced is by a combination of spending reductions and increased revenues.

Before commenting on what to do about the budget situation, I want to: -Present the latest figures from the Congressional Budget Office -Define some of the terms (as I understand them), and state a few rules that have to be followed.

CBO REPORT

From the "Monthly Budget Review"
for Fiscal Year 2011 (ending 9-30-11)
published by CBO on 10-7-11 (dollars in billions)

....................Actual.......Prelim
....................FY2010.....FY2011

Revenues......2,162........2,303
Outlays.........3,456........3,600
Deficit.........-1,294.......-1,298

Revenues (Income/Taxes)
Individual.........899........1,093
Soc Sec..........865...........819
Corporate........191...........180
Other...............207...........210

Total.............2,162........2,303

Outlays (Spending)
Defense..........667...........679
SS Benefits.....696...........720
Medicare.........450...........483
Medicaid.........273...........275
Unemploy't......162...........123
Other...........1,048........1,088

Subtotal.......3,295........3,368

Interest...........228...........266
TARP............-108...........-39
Other...............40..............5

Total............3,456........3,600

I know, I know, that's a lot of numbers to throw at you all at once. Just hang on for a while. You don't have to read or study the table, just hold on to it as something to refer to.

DEFINITIONS AND RULES

I don't pretend for a minute that I am an expert in budgeting (or anything else). I just like to run off at the mouth (or keyboard) from time to time. But in any case, let's see if some informal definitions will help assure that we are "singing from the same songsheet." Here are some terms and what I think they mean:

Income - same as revenue, taxes, receipts
Expenses - same as outlay, spending, out-go
Deficit - expenses are greater than income
Surplus - income is greater than expenses
Balanced budget - income equals expenses
Debt - amount owed; accumulated deficits
Debt ceiling - limit of money owed; set by Congress; changes frequently
Cuts - reductions in spending or the growth of spending
Cap - spending is limited (capped) to a certain amount, usually prior year's spending
GDP - not strictly a Federal budget item, it is the sum of all goods and services in US

Now for a few rules regarding budgets:
1. A deficit means the debt increases
2, A surplus means the debt is reduced
3. A balanced budget means the debt does not change
4. Interest paid depends on the going rate

THE BUDGET PROBLEM TODAY (Why It Is a Problem)

In my previous blog on the Budget Crisis I drew a comparison between the Federal budget process and your typical credit card bill. I'll toss out another comparison:

We've all seen a movie or TV show that presented a family headed for disaster. They were well-to-do and living high, but after financial reverses, the dummies kept on spending and refused to cut back on their expenses. Pretty soon, debt piled up and...you know the rest. They were ruined. The same thing is happening at the Federal level.

What is the consequence of inaction? That is, if Congress keeps raising the debt limit and continues to approve deficit-ridden budgets, what will that mean? I don't know. But the idea scares me. The family in the show above better do something or they'll end up in the poor house. Is there a Federal equivalent to "poor house?"

Current solutions as proposed reduce the deficit but do not eliminate it. The debt grows every year. And what will happen when the interest rates go up? The amount of interest paid by the Treasury Department will go up too.

Be aware of two things:
- Spending reductions are usually given for a period of ten years; makes them seem bigger.
- A "cut" in a specific program may still result in a spending increase. A cut is not the same

as a cap. For example: A Federal Agency is expected to increase from $100m this year

to $110m next year. The administration reduces next year's level to $105m. That is

considered a "cut" of $5 million.

The big problem is this: No matter what reductions are proposed, strong objections
will try to shoot them down.

WHAT TO DO ABOUT THE BUDGET CRISIS

Much of what can be done to improve the budget problem depends on policy reform. For instance, launching a war is going to increase Defense spending. I plan to have some comments on this topic (Policy Reform) soon.

President Eisenhower in the 1950s directed a 2%/10% reduction in each agency. This was a 2% personnel cut and a 10% cut in the rest of the budget. So, some reforms can be effected by executive action. Another is a freeze. This can be in hiring and promotions. Reforming taxes can go either way -- increase or decrease revenues.

Specific cuts/caps that ought to be considered:
- DOD cuts -- new weapons systems, base closings, mothball 2/3 of the sub fleet.
- Policy reform -- changes in social and welfare programs, energy policy, etc. would

have dramatic impacts on the budget.
- Energy -- increase US output of oil and gas.
- Social -- means-test socsec, limit welfare/medical coverage to US citizens.

CONCLUSION

I have no real conclusion to offer that would resolve the budget crisis. Short of appointing a Czar with total authority, I think our present system just isn't equipped to address situations like the one we face. I just don't have much confidence in the ability of Congress and the White House to work together to find an adequate solution. The outlook is grim, indeed.

Walter Magee

"You can't do that - it's not in the budget!" This phrase is guaranteed to cause maximum frustration to anybody involved in trying to grow a business. For businesses in this situation, it's time to throw off the tyranny of budgeting and embrace the new concept of flexible planning. But where does traditional budgeting go wrong?

The traditional approach: completing the budget for the upcoming year
When the clocks go back is the time most business owners start to think about the new annual budget. Hopes and ideas gradually come together as figures are calculated, resulting in a reasonably detailed budget being completed by Christmas. As the Christmas parties begin, business owners relax in the knowledge that the budget contains an elegant breakdown of the sales and costs for the upcoming year and when targets are due to be met. The festive season goes into full swing as these newly printed budgets give a sense of satisfaction and a feeling of control over the coming year.

Best laid plans...
However, by the time the clocks go forward in the spring, it can look very different. That sense of control and satisfaction dissipates as actual results are compared to the budget. Perhaps sales have not quite lived up to expectations. Margins in one of the key products have been hit by that unexpected new competitor. One of the other products is gaining a good position in the market but it needs some expenditure on marketing that wasn't anticipated and therefore didn't make it into the budget. There is an outstanding candidate for the vacant sales manager position but the headcount is already over the limit set at the end of the previous year. This wasn't how it was meant to be!

Business moves fast and budgets rarely keep up
It is a sad fact of life but a budget is more than likely to be out of date virtually the moment it is completed. Business today moves very quickly and it is vitally important for any business, big or small, that its planning processes are flexible enough to move with it. Therefore every new opportunity or setback should be used review business plans and reset business goals. Maybe that salesman will land a long sought-after contract. Perhaps that merely promising product can become a key product with some marketing. Therefore, the business owner should examine the options, recheck any constraints that might exist and use the opportunity to prepare a new forecast to refocus your business priorities. By doing this, the new forecast may actually end up exceeding the original budget.

Are budgets a waste of time? Not if you use them right.
So does this mean that an annual budget is a waste of time? Maybe the once a year inflexible detailed process is, but budgets remain an excellent opportunity understand the business and re-evaluate business strategy. Budgets can also help one focus on how to use resources and identify funding requirements well in advance of their being required. The secret is to combine them with a series of regularly updated rolling forecasts that replace the often backward looking comparisons with budget, and focus on the requirement to know where the business is going rather than where it has already been.

Remember - budgets and business plans are designed to help the business - don't become a slave to them!

When it comes to budgeting, some people are better at it than others, but some people are great at creating a budget, but they simply cannot stick to it. Creating a budget is the easy part; you can make fancy spreadsheets or even purchase software programs. You might be a procrastinator and think you will begin your budget next month, but then next month never comes and you end up spending too much money. There are some quick tips to help you stick to your budget.

1. The first thing you need to do when planning a budget is getting the entire family involved. If you are one of five people in your household, you cannot simply make a budget, stick it on the refrigerator and assume everyone is going to follow it. Instead, get everyone together in planning the budget, what you need and what you do not have to have. Get your children involved because this will help them later in life with their own budgets.

2. Your budget should part of your daily schedule, in other words, it needs to become habit forming so that your budget is always in the back of your mind so that when you pass by that new boutique shop, you do not have to drop $300 at one stop.

3. Do not use your credit cards to pay for daily expenses. For instance, do not put your groceries on your credit card; this should come out of your earnings from your job. Credit cards should be reserved for large purchases and emergencies.

4. It is important to have some kind of reward built into your budget. For instance, two times per month is movie and dinner night, or one night per week you eat at a restaurant. This rewards you and gives you something to look forward to because if you are all about budget and never feel rewarded, it is easy to stray from the budget.

5. Plan to begin your budget when it is going to be easier to stick to. For example, you might not want to begin a brand new budget right before the holiday season, rather, you would want to wait till January 1 and begin fresh. People that begin their budgets right in the middle of a season when spending money is expected are sure to fail and become discouraged.
Final Thoughts

Budgeting is very important because it helps you to live within your means. When you are spending more than you are bringing in, you are spending outside of your means and it will catch up to you eventually. This is why is essential to begin a brand new budget that the entire family has put together and then stick to it, in the end, you are happier because you are not stressed out about bills and credit card debt piling up.

Money comes, money goes - why have a budget at all? A budget is such a handy little tool. Yes, I questioned the first several that didn't work for me. But when finances became scattered, I'd try again. I finally found a budget method that worked for my family. And I couldn't live without it. A budget is like a roadmap. It tells you whether or not you are going in the direction you want to be going. It helps you decide what you need to cut out, what you need to add and what to do with your life.

You have goals and dreams. It may be that you want to own a home. You might want to send your children to college. You may just want to retire well. Or go on vacation. Or pay off all those credit cards. Or be able to afford to pay all the bills each month. If you don't have a budget, you'll never be organized enough to make all of your dreams come true. A budget shows you how to control your money. Your money isn't making your spending decisions -- you are.

The budget will also let you know if you are going overboard. If you see a lot of debt payments in your budget, you could be living beyond your means. If you see that your income is far below that of your expenses, you know you are on the path to disaster. The budget allows you to see that you need to turn around and start over on a new road. Budgeting allows you to save. Saving doesn't take more money, it takes a little thought. You could find $5 dollars a week in your budget to save. In only two years, if you invest wisely, that $5 a week could be thousands.

Your budget allows you to keep your savings goals present in your mind. It is easier to resist temptation when you are constantly reminded of what you are saving for. You can actually have more spending money through a budget. Most people assume budgeting means you won't get to shop freely every again. Not true. You actually have more money because you are spending wisely. Simply set aside money just for your shopping sprees. That way, you feel no guilt. What an idea!

Budgets keep you out of debt, help you out of debt and reinforce why debt isn't a good idea. Once you sit down and write out all those credit card debts, you will see why you need to get rid of them. Go ahead, add up all the amounts. Calculate how long minimum payments will require you to pay.

Budgets aren't slave drivers. They truly are liberators. People who form budgets have money. They invest wisely. They get out of debt faster. They have less stress because everything is planned out. They know that their money is secure. They are in control.

Sit down and start your own budget right now. You'll really thank it someday for all the advantages it gives you. It just takes a little time.

A budget is a tool to help manage and control your family's finances. As with many situations, having a plan of action can help you understand, focus and succeed. In this case your family's financial well being is extremely important and budget planning is a major cornerstone of that financial well being.

It is important to understand that budget planning should not be viewed negatively; many people assume that when they are on a budget, the things they like to do and buy the most will be off limits or severely minimized. This is not the case; in fact budget planning allows you to enjoy these things guilt free, without living beyond your means.

When planning a budget it is important to sit down with your spouse and talk about income and expenses that you and your family have. Budgeting should always start as a rough outline, just to get a broad idea of what your expenses are, what are your largest expenses and how effective your monthly or yearly income or investments are at affording these expenses. You should never plan your budget and set it in stone. Just as your income and expenses change, so should your budget change. Your budget is a tool that should help you live within your means and to allow you to free up money for the things that you want to do, instead of freely spending it on the things that are not necessary or impractical.

When budget planning, most families realize that they have been spending a significant amount of money on items that they have little use for, which then can be focused on things that will ultimately make them happier. In this way, budget planning can have an extremely positive affect. Budget planning is an extremely important factor in your family's financial health; by planning your budget wisely, you can attain the things that mean the most to you and your family.

Whether you're living paycheck to paycheck or you have a surplus of savings built up, learning to budget your money - and maintaining an ongoing budget planner - is vital to proper money management.

There's no one right way to budget your money. Some people like to jot income and expenses down on paper, others keep a sophisticated budget spreadsheet and still others prefer using a free, online budget planner that does most of the work for you. It doesn't really matter how you keep your personal budget so much as picking a method that makes sense to you and one that you will maintain regularly.

To make sure your budget does what it's supposed to, be sure to avoid these 11 budget planning mistakes:

1. Not keeping a budget planner at all.

If you have no semblance of a budget planner and never write your income and expenses down, how do you know the state of your finances? How can you be sure you're not spending more than you're making? If you don't manage your money, it will manage you - in the form of debt, interest charges, bad credit and other unpleasant consequences.

2. Thinking short-term.

A monthly budget is a great first start, but it's difficult to account for less regular expenses that way. Think ahead at least a year and budget one-time items and other events - like holidays and birthdays - so your personal finances aren't turned upside-down by a single occasion or large purchase.

3. Being unrealistic.

If your budget planner never matches up with reality, what's the point of keeping it? The ideal personal budget tracks real income and expense patterns, and allows you to plan for the future. If your estimates are always off, however, your future finances are no more than a guess. To help keep it real, estimate what your expenses will be for the next month. Then, keep track of your actual expenses. At the end of that month, compare the estimates with the actuals. That way, you'll learn how you are really using your money so you can make better estimates for the future.

4. Spending more than you earn.

This may seem like an obvious error to avoid, but with U.S. consumer debt reaching $2.45 trillion at the end of 2009, according to the Federal Reserve, it may not be obvious enough. Keeping an ongoing personal budget will help you to track what's coming in and what's going out - and to make sure the first number is higher than the second one.

5. Saving too little.

Savings shouldn't be an after-thought; it should be budgeted just like everything else. Traditional thinking holds that you should save 10 percent of your income. Whatever number you choose, add it to your budget planner and stick with it. Set up a direct deposit from your paycheck into a savings account, if possible, to make it automatic.

6. Neglecting to plan for a rainy day.

Aside from your savings, you should budget for a rainy day - an emergency situation for which you can't necessarily prepare, like an unexpected medical expense, house or car repair, or job loss. Like your general savings, there should be a place for these funds in your budget planner rather than pulling from whatever might be left over at the end of the month.

7. Keeping an overly elaborate budget.

If you're a budget nerd who prefers an incredibly detailed spreadsheet, kudos to you! But if you're like most people, making your budget planner too labor-intensive and overly detailed will likely lead to budget abandonment. Everyone requires a different level of detail; find yours and stick with it. If you're just getting started, begin with a high-level budget and add more detail as you need it.

8. Allowing your checking account balance to go too low.

When you near $0 with your checking account - or main bank account - you're flirting with unnecessary fees and frustration. Budget yourself out of this predicament by setting a new zero. If you view an amount - let's say, $100 - as the new absolute minimum, you'll prevent yourself from losing any money. Plus, you'll have a safety net in place if you ever make a budgeting error.

9. Relying completely on bank and credit card statements to get it right.

Don't assume that what's on your bank statement or credit card statement is 100 percent correct. Retailers, banks and creditors make mistakes too and if you don't at least occasionally double-check with receipts, you may be forfeiting your hard-earned cash.

10. Never adjusting your budget planner.

Your personal financial situation is bound to change. Update your personal budget with new sources of income and new expenses, and make sure to adjust your budget to align with your spending habits. Keeping an archive of your budgets is a good idea too, as it allows you to look back and determine spending patterns and what adjustments you should make.

11. Not accounting for interest.

Neglecting interest charges on credit cards and loans in your budget planner will likely lead to a budgeting shortfall, especially if you're paying hefty sums in interest each month. You don't have to get the amount of interest exactly right in your budget, but it's smart to make a best guess. Estimating interest will allow you to really see how much you're paying to borrow money from creditors and lenders, and will help ensure that you have enough money budgeted to cover these payments.

All businesses need to plan ahead, the reasons for planning are:

- the business has a plan of where it is going and what it wants to achieve
- resources can be allocated to meet those expectations
- everyone is aware of what the businesses expectations are
- decisions can be made more easily
- progress towards those expectations can be monitored and measured and if necessary action can be taken to correct adverse situations
- it outlines what cash is required to fund the activity and provides an understanding of what the cash is to be spent on

From what has been outlined above it is obvious that the budget is an important management tool to both communicate where it is going and control performance during the budget period, the difficult economic climate of the past couple of years has only increased it's importance to businesses. Below are some tips that you may wish to consider in preparing the budget for your business:

- consider using zero based budgeting, adding 5% on to last years budget is easy, but having to justify the budgeted amount in total forces organisations to be much more aware of costs than simply adding a % on to existing amounts.

- get as much detail in the budget as possible, the more you drill down into your costs the better you will understand them and the more you will get from the budget, don't lump things together.

-don't allow costs to be moved from one account to another to compensate for over/under spending as this stops weak spots and trends from being identified.

- monitor actual costs against budgeted costs regularly and understand both over and under spends and be prepared to take action on what you see.

- understand how your costs relate to revenue, are they variable (move in relation to revenue) or fixed (changes in revenue have little impact on cost).

- you need to understand the effect the budgeted costs will have on the cash flows of the business so prepare a cash flow forecast to support the budget.

- prepare budgets for different levels of organisational performance, for example you could prepare an optimistic, expected and pessimistic budget (these are very useful for understanding how costs will behave at different operating levels but care needs to be taken on communicating these budgets as it could prove confusing to people as to which budget they are working to).

- consider using the budget to promote accountability and ownership amongst the workforce, should you decide to do that then you must also give the authority to control that part of the budget to the people concerned.

- don't just prepare an annual budget and rely on it, review it regularly and be prepared to change it if necessary.

Business women must take control of their finances in order to control debt management. One powerful way to do this is through good budget planning and management. In fact, not understanding your business budget is a great way to find your business in a lot of trouble. Here are five quick tips to help business women see that budgeting doesn't have to be difficult and can be a way to keep business debt under control.

#1: Be Grateful for a Balanced Business Budget: Money and budgets are two intertwined concepts. Having enough money to start your business and then being able to generate new money through your business is a reason to enjoy working within your budget. Learn to be grateful for having a business budget that is balanced. That means, you have more than enough funds to cover the expenses of your business and some left over for your profits. Stopping to give thanks for a balanced business budget is a great habit to form when learning how to make the business budget process joyful.

#2: Keep an Eye on Budget Categories: A properly prepared business budget sets out categories for different expenditures in the business. It's important to keep an eye on the categories as you make expenditures. Which categories stay within the budget line? Which categories go over budget? Which categories need less money and perhaps have enough to shift to another category?. Keeping an eye on the categories lets you see exactly how you are spending your business money each month and will let you end the year without going into business debt.

#3: Be realistic about business income: Income in business is similar to personal income. You want to plan and use your budget so you can begin to see when you have more income and less income from business operations. This is not easy for self-employed business women, commission based sales women or business owners, because business fluctuates. It is particularly difficult in the first years of operations when you don't know how the income will fluctuate. Try to estimate expenses high and income low the first year in order to keep the budget realistic.

#4: Make budget goals realistic. There's more to budgeting than just writing the numbers on paper. You what to set and attain your financial goals, too. That has to do with being a business success. Before you sit down to create a budget, take a few minutes to evaluate and document the financial goals of your business. Do you want to save for more office equipment? Should you try to hire a new helper in six month? Are you thinking of moving from your home office to a physical location? What are your business goals? Without goals, a budget is nothing more than a detailed checkbook register and not a realistic working document for your business.

#5: Plan for flexibility: If your business budget and categories are so tight that you can't afford to make one spending mistake in your daily operations, the budget will be painful to create and more painful to live by. Make financial room for a bit of flexibility in your business budget. Don't forget to budget in for office decorations, fresh flowers, and to send a thank you card or birthday greeting to clients. This will let you enjoy doing your business each day and give you more motivation to work hard. You don't have to put away too much for this but even $100.00 will help in the long run and give you some leeway to move around in your business operations.

If you want your budget to be something that is a debt manager for your busy, you wan to make it realistic and workable. When you design the budget process to be easier to follow, you will be able to use your budget to help keep your business out of debt in the long run.

A good budget is made to last throughout the years. Yes, you can budget in the short term to get through troubled times, but the best budgets will take you out of trouble and to your goals. Budgeting is essential in planning for your future.

There are ways you can make your budget easier to commit to. The number on thing to remember throughout the budgeting process is that a budget is not a fixed document. It has to be flexible, as your spending changes over time. It is a guideline, but detours do happen.

1. Start with a budget that fits your family's situation and spending habits. The key is having money left over, not where you are spending money. Don't follow someone's percentages as to how much you should be spending on groceries or gasoline. Your budget must fit your family.
2. It is necessary to accurately list your income and expenses. Don't round things up or down. Don't smudge on how much of your income goes to taxes. Don't leave things out. Be honest, or it won't work. Never budget for a future income, budget for right now.
3. You need to include enough categories so that you know where your money is going. However, too many people go to extremes in details. You don't need to necessarily track every single category, you can lump some together. For example, my family budget includes a free spending category. This can be anything from clothing (we don't purchase a lot of clothing) to a night out on the town.
4. You have to include things that don't happen monthly, such as your auto insurance, homeowner's insurance, property taxes and yearly leases. Make sure that you are putting these amounts in an account for when they come due. This will save your budget when you get the bills for yearly expenses. You won't be left scrabling. This is just as important as having an emergency account for auto maintenance and other repairs.
5. You need to regularly review your budget to determine that you have enough categories and are budgeting enough for each category. You should also look for ways to cut your spending in your categories. Some things you can consider a challenge. Aim to cut your grocery bill by $40 next month. Look for ways to save. They are there.
6. Make sure that you track how much cash you are spending. Keep receipts if necessary -- this is usually easier than writing things down as you spend them. If you aren't good at tracking, give yourself an allowance of cash. This is all you have to spend. We do this as we are awful at tracking our spending. But we never overspend on our cash limit for the month. We know what can and can't come out of our checking, so it protects our budget. In fact, most people respect cash more than checking, so they will actually be stingier with their cash reserves.
7. Budget your savings as a bill that must be paid. I recommend having it automatically withdrawn from your checking each month. That way, there is no way to avoid paying your savings. It is already gone. You won't spend it thinking you'll put a little extra in next month. The most important bill you have to pay is your future.
8. Have realistic goals. Budgeting isn't about tracking money, it is about meeting financial goals. It allows you to save for your future, for your kids' college, for vacations and other things you want to do in your life. Without these goals, there is no reason for a budget and it will fail.
9. You need to see how you spend your money by looking at your budget. Most people are amazed at how much they are spending in various areas. You need to be able to look at your budget and see exactly what can or needs to be changed. You can always cut costs and save more. Challenge yourself.
10. The top thing is keeping your eye on the goal and remaining positive. Your attitude will make your budget work. Don't look at your budget as something holding you back. Look at it as a way to find money for your future. A budget can definitely make your life much easier. But you have to stick with it.

If you've developed a household budget to get your spending back in line or to just reduce stress, good for you! Creating and sticking to a budget isn't easy by all means. But it represents the best way by far to manage your finances so you can relax and worry about other things.

A budget can also be a very useful tool for ending financial arguments -- assuming that you and your spouse agree how much to allocate for each of the categories in your budget.

The big categories are usually the easy ones. You know how much you pay for rent or your mortgage. Ditto other items such as your car payment(s), heating bill, phone bill and the like.

These are all fixed expenses. In other words, they are expenses that cannot be easily cut. They can be reduced but not without a major effort. For example, you could sell your home and buy one that requires a monthly mortgage payment.

However, many of the other items in your budget are discretionary expenses. In other words, they are expenses you can control and cut. This category includes items such as clothing, entertainment, insurance (yes, you can cut the cost of your car and health insurance), cable or satellite and groceries.

Some of these categories can also become budget busters or what I call budget gremlins if you are not really careful.

One of the biggest of these is entertainment - which should include the cost of eating out. You may find there's only a little money left over for entertainment. Yet, it's very easy to overspend by "rewarding" yourself after a hard week or month by taking your family out to eat at an expensive restaurant. Or by treating you and your spouse to a night on the town, complete with a babysitter for the kids. If you're not careful, you can lose track of these spur-of-the-minute expenses. Come the end of the month, you might wake up and realize that these little "rewards" have cost you $100, $150 or even more over budget.

Another category that can be a budget gremlin is clothing. In the first place, it's a difficult budget category as it is next to impossible to forecast with complete accuracy what your family will need in the way of clothing over the next 12 months. Even if you budget very accurately, there is always that great suit or dress that's on sale, or that really neat athletic jacket your son is begging for. Again, you need to be very careful or you may find that what you spent on clothing last month was actually50% more than you had budgeted.

Here's another potential budget gremlin. If you have a pet, make sure you budget for pet care and supplies. Just one trip to the vet with your furry friend can cost big dollars. And what about gifts? This is also a category where costs can get away from you unless you watch them closely.

Finally, for a budget to work, you and your spouse need to have some "miscellaneous" money or money that doesn't have to be accounted for each month. For example, you might allocate $50 or $100 monthly for each of you. That way, you could each "splurge" on something without feeling guilty because you're breaking the budget or taking money away from other, more important things.

Creating and sticking to a budget isn't easy, but it can be a real life and marriage saver.

There are two methods commonly used to prepare the Financial Budgeting Spreadsheets. These two methods are "Bottom Up Budget' and "Top Down Budget". Both methods share the same objective to produce an accurate Financial Budgeting Spreadsheets.

Bottom Up Budget

In the "Bottom Up budget" method, the company let the all the managers of departments (HODs) to come up with their own budgeting spreadsheet justified by formulae, researches and plans. The HODs will do the first review of the spreadsheets. Once they have finalized, the spreadsheets will be submitted to the Financial Planning Unit for further review. During this review process, the budget figures will be fine tuned. During this review stage, it is quite common for the spreadsheets to flow in and out between the respective Departments and Financial Planning Unit.

Once the Financial Planning Unit finalized the spreadsheets, it will be submitted to the Board of Directors (BODs) for final review and final approval. During the review by BODs, there may still be spreadsheets flow to and backward to the BODs. But the frequency of these would be very much reduced at this stage. Once the BODs finalized the budget figures, the financial budgeting spreadsheets will be final and ready to be implemented by the respective departments.

Top Down Budget

In the "Top Down budget', the Financial Planning Unit uses the historical reports such as Balance Sheets and Profit and Loss Statements, to comes up with preliminary budgeting spreadsheets. The Financial Planning Unit will hold a meeting with all the BODs and HODs and presents the preliminary spreadsheets to all. During this meeting, the spreadsheets will be discussed and fine tuned to the satisfaction of the meeting. Once the meeting finalized, the spreadsheets will be circulated to the respective departments for implementation and to draw up plans to achieve budget figures.

Pro and Con

Both the above methods have their pro and con. The "Bottom Up Budget" is slow but the budgeting spreadsheets tend to be more accurate as all levels of the company staff, from bottom to top, are involved in the preparation of the budget numbers.

The "Top Down Budget" is faster but the budgeting spreadsheets are less accurate as the budget numbers are decided at top level meeting and the participation of lower level staff are limited. The impact of this less accuracy can be minimized by applying some financial analytical ratios and formulae to fine tune the final budgeting spreadsheets.

The review process may be differ from organization to organization. But the main objective of the review process, that is, to produce Financial Budgeting Spreadsheets as accurate as possible, is the same.

I personally prefer the "Top down Budget" method and fine tune it with various analytical rations and formulae.

Budgeting involves the planned allocation of funds to various departments in a business organization. Budgeting is often done by enterprises on a periodic basis. In simpler terms, it means planning for and estimating the financial position of an organization in a given time period.

The process of budgeting is very basic. Budgeting helps keep track of the health of a business, be it big or small. An individual with a basic income can also plan his budget. A simple rule for making a financial statement is keeping the accounts very simple. The expenses can be noted on a day-to-day basis; these expenses can be clubbed under one subcategory.

The usefulness of a budget depends on the reliability of the information used to create it. Unrealistic estimates of prices, yields, or input quantities would lessen the accuracy of the budget and could possibly lead to a faulty financial decision.

The process of budgeting can help make sound management decisions in any organization, if the information used for making the statement is reliable. If the process is undertaken on a one-year cycle, one should plan the next budget at least three months prior to the end of the current one. If the budgeting is for much shorter periods, for instance one month, one should begin preparing next month's budget within one to two weeks prior to the start date.

As per business terminologies there are six broad types of budgets made by enterprises, namely, sales budget, production budget, material purchase budget, staff budget, overheads budget, and capital expenditure budget.

Most organizations use structured planning to yield maximum results in key areas, including return-on sales, revenue growth, asset management and equity. Many businesses carry out the process almost on a daily basis, and include the majority of the activities associated with business planning, such as growth areas, competitors, cash flow and profit.

One of the prime benefits of carrying out annual business planning is that it gives organizations the opportunity to understand the performance, and also helps in realizing the factors affecting it. It also helps to make continuous improvements and anticipate problems, and offers sound financial information on which to base decisions, improved clarity and focus.

Ways to build better budgets refer to the methods developed by the financial experts to make the budget as error free as possible. In other words, these help us in understanding the ideal process of budget making. There are several small processes those when combined make the perfect budgeting process. These include effective tools for budgeting, automation, strategic planning, dedicated resources and teamwork.

Connecting Budgeting and Strategic Planning;
Ways to build better budgets include linking the process of budgeting with the strategic planning. Strategic planning is the process of setting the destination of company, and like any other journey, here also you need an efficient vehicle to reach that destination. Better budgeting helps you exactly this way in achieving your goal by playing the role of vehicle.

Distribution of the Responsibilities;
In the process of finding ways to build better budgets some companies have come up with the idea of developing, the strategic service centers and conferred the responsibility of making better budgets on them. Companies have asked every service center to make the budget and accounts. A detailed report is sent to each center to tell them regarding the charges to those accounts. Results of this technique are very good because budgeting process has involved more peoples than before that too from the lower level of staff. Future projections have become more realistic in this process because of greater control and greater accountability of the people there at strategic service centers. According to one expert there are several advantages of this approach and is being appreciated widely. It not only helps in better profitability, but also better decision making. In the absence of this approach, getting input would have been very difficult.

According to some experts, promoting the internal cooperation is also among the proven ways to build better budgets. It is general tendency among people that they dislike the budgeting process. However, it is possible to gain some speed by making small pieces of overall process and thereby making somewhat understandable and interesting to the people. Providing information openly to the every person in the company produces better results. If they have access to the information regarding expenses, labor cots, revenue and the numbers you will observe significant improvement in their performances.

Make It Paperless and Automatic;
People avoid budgeting because they feel it as a time taking process that requires much of the paperwork. If you can make the overall process of budgeting automatic and paperless, it may also be one of the ways to build better budgets.

Budgets never get the job done. Have you by chance noticed yourself, or somebody else declaring that in the past? I believe that budgets completely work. The issue is that most people do not work at pursuing tips on budgeting and they need personal finance help. The concept of a budget is very easy, and to state that it won't work is simply down right absurd. There exists one particular solution that can certainly help you. Actually, this one secret is that main reason why budgets almost never work for many people. Read on.

What exactly is the concept of a budget? Well this is exactly what I state: A budget is the idea of taking care of your money if you wish to spend equal to, or less than what you make. As you would expect if you accomplish this then you won't go into debt. Simple right? I think so. Then why is it so tough for many people to make a budget work? I'll tell you the number 1 secret that makes a budget work: You will need to connect significant satisfaction with taking the actions needed to balance a budget.

This is called neuro-associations. It was a technology designed by Anthony Robbins and it stems from the idea that all humans make decisions for two reasons:

To steer clear of pain or,

To gain enjoyment

You see, if you consistently connect discomfort with the act of managing a budget then I am sorry to tell you, but a budget will under no circumstances work for you unless you change that. Most people do not associate pleasure with following tips on budgeting. They see it as too hard to follow. All they see is all the things they cannot have, destinations they cannot go and goals they can't accomplish. I'd state the opposite: correct financial planning will help you attain your goals and dreams. So keep in mind, the key to making a budget work is to link up considerable enjoyment with the act of running a budget. If you require personal finance help then this is a must. Unless you take this step then you are likely to always have difficulties as you try and take the actions necessary to balance your budget. For additional helpful tips on budgeting read more of our content or check our website for free tools that can make this secret come true for you.

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Very few of my small business clients have a budget for their business. There is something about the word "budget" that implies "limitation" and "external control" for them. Very few people see a budget as a management tool in their own arsenal which would help them steer their business better.

Developing a budget doesn't have to be hard, either, especially if you have accurate financials. There are basically two ways of approaching the budgeting process:

Zero-based budgeting and Incremental budgeting

There are advantages and disadvantages to both methods, so it will be up to you to decide which approach will be best for you.

Zero-based budgeting
When using the zero-based approach you build your budget from the ground up. Every single item is questioned and needs to be justified. It is an approach in which you look at your operation and ask yourself: "What do I need to accomplish my goals"? You don't concern yourself much with what you spent in the past, but rather with what it is you need to operate your business now and going forward. You start with a blank slate and brainstorm about the infrastructure, marketing and support functions for your business.

You may want to have a list of expense categories as a structure, but perhaps leave them blank for the time being and not even look at any historical financial information.

Incremental budgeting
In contrast, incremental budgeting starts with historical information and simply adds to it (or subtracts, if applicable). The justification is generally limited to the increases, not to the entire budgeted amounts. So, for example, let's assume you spent $35,000 last year on marketing. In an incremental budget you may say - "well, this year I will need to do more, because I'm starting a new product line. So I will add $10,000 for my new product". Not much time, if at all, is spent on looking at the $35,000 spent last year and whether it would be needed again.

Or, in even more general terms, you may say "I predict that inflation will be around 5% next year, so I will budget for a 5% increase in my expenses across the board".

In my own practice, I do a little of both. Since I have pretty good historical financial information for my business, that's always my starting point, but as I go through my prior spending, I examine every element of every line of expense. I always question what I'm spending my money on, even when I'm not making a budget, and I try to be very flexible so I can make changes in my financial commitments as soon as I see that I derive no benefit from the service or the product I'm buying.

So, for example, if my marketing expense last year totaled $5,000, I would look at all its components:

• Chamber of Commerce memberships $1000
• Brochures $1000
• Website $1000
• Business cards $500
• Client gifts $1500

And then I would assess the benefits derived from my Chamber of Commerce memberships and decide whether I wanted to continue them. I would take an inventory of my brochures and my business cards and see if I needed any more. I would decide how much to spend on marketing my website this year. Perhaps it would be more, perhaps less, depending on the place my website plays in my overall business strategy. I would then also evaluate the amount set aside for client gifts. And then, I would ask myself: "Is there anything else I think I need to do this year with my marketing?"

Once I had all my numbers together, I would look at the result - my first draft of a Profit and Loss statement for the next year.

Fine-tuning Your Budget
At this point I would take a step back and say to myself: "is this result reflecting the goals I have set for my business for next year?" I'm assuming of course that you have set those goals at the outset. If not, it's never too late. You can formulate them right now.

How much do you want to grow? Do you want to expand into any other areas? What are your profitability goals?

If your first budgeted Profit & Loss statement doesn't meet those goals, you will just have to go through a couple of rounds of budget adjustments until you have the picture you are looking for. Once you do, the next step will be regular (monthly) monitoring of your actual performance against your budget.

Happy Budgeting in 2010!

Your budget will guide you through the financial processes that build financial freedom and personal wealth. This guide will help you build security and independence. Without it, you are wandering aimlessly in the dark.

The budget is the main requirement for financial planning. Without it, you can dream all you want, but you will not know how to make dreams into reality. Budgeting helps you organize both your current financial information and your long-term financial picture.

It is vital that you plan for a secure financial future. By setting goals and knowing what you are working towards, budgeting becomes a great tool.

Any good budget will address your entire financial picture, not just your day to day spending. It should manage what you make and what you spend. It should track your spending, showing you were you can cut back. It will help you prepare for emergencies. And most importantly, it can help you fulfill your savings and investment goals. It will not only make today financially peaceful, but will secure your independent life in the future.

I know that it is easy to forget about the long-run, so we don't budget at all. Even I have a lapse in financial judgment every now and then. But budgeting will take you farther and benefit you throughout your life. A budget will keep you moving towards were you need to be going. You are reviewing your goals on a regular basis, which keeps them on the top of your priority list. Budgeting will allow you to live today and save for the future at the same time.

When you are budgeting, it is easy to identify the areas in your life where you are overspending. You are able to spot financial problems before they attack you. With a budget, you find the ways to eliminate your debt and start saving for your goals. Debt is often the result of overspending and poor money management. If you have a budget, you are taking control of your finances -- which is beneficial in halting the debt accumulation. Personal finance plans can effectively allow you to manage your credit in a responsible manner.

By reviewing your budget on a regular basis, you are able to see your progress towards achieving your goals. Without a budget to review, you are simply flying blindly. Many Americans are unable to tell you how much money they have in their checking, investments and debts. If you don't know what your financial situation is at any given moment, how can you make any financial decisions during the day.

A budget simply assists you in getting your mind prepared to make financial decisions. You are able to properly assess the situation and make an informed decision in regards to where you money goes and who it is going to.

With a budget, you can build wealth, attain personal goals and prepare for your future. Manage your money right now, don't let it manage you.

Do you want to know how can you can get started on a budget and get yourself out of debt? If you've been struggling to get on a budget and have tried several times but they never seem to work for you, here are some tips. There's really no easy answer except to do it. The reason most people's budgets don't work is because they continue to spend more money than they make on a month by month basis. If this is your problem, you'll need to solve that first. No budget will work until you commit to living on no more than you make.

Go through each budget category and compare it to your own spending. For instance, if your housing expenses allocates 35% of your income and your budget is consuming 60% on housing, your budget won't work. The logical solution to your problem is to sell your house, move to a less expensive one, and get your budget percentages back in line. There's really no other way it will work.

A second problem that many people run into is that they set up their budget properly as recommended, and then they find out the first month that it doesn't work because they allocated $25 to car repairs, but they had a $150 car bill. The only way that most budgets will work is over the long term. Remember that you didn't get into debt and one month, and you're not going to get out of debt in one month.

But if you stick to the budget, it will work. At first, you might have to get that $150 car repair bill by robbing every other budget category. However, if you'll stick to the plan and start paying those categories back, within one year you'll find that you have the surpluses to meet emergencies in the various categories.

When you start your budget, you have to tailor it to your family.The bottom line with any budget is that when you add all the percentages, the total cannot exceed 100%.

You must also be realistic. Many people try to make their budget work by allocating zero for things like entertainment and recreation, clothing, miscellaneous, or some other category. This won't work. No one walks around naked, therefore, you have to have money in your budget for clothing. And yet many people's budgets allocate nothing for clothing. It may mean to you have to modify your buying habits for clothes, but you do have to have something in every budget category. Allocate money for everything.

Regardless if a big corporation is looking at the bottom line, or an individual is concerned about a personal budget or a household budget, there is a common philosophy that pertains to each situation. This philosophy is also adhered to by a good online budgeting program.

"It's not necessarily what you earn that counts the most, but what you don't spend that is more likely to lead to financial success."

In other words, what would be the point of a big company showing a two million dollar income for a fiscal year, if they spent three million dollars to get there? It's the same for an individual. What's the point of earning sixty thousand dollars a year, if in fact you are spending eighty thousand dollars a year? It happens all the time. Credit cards make it extremely easy for personal budgets to get way out of hand. Often it carries right over into the household budget as well, because it reaches a point where they meld into one because of undisciplined spending habits.

Many people need guidance when it comes to handling their personal and household budgets. That's where an online budgeting program comes into play.

An online budgeting firm specializes in helping consumers organize household budgets as well as personal budgets. Once you make the decision to put your financial woes into the hands of a company with experience in online budgeting, you will be taking the first steps to financial freedom.

It takes very little time to enter your income and expenses onto the forms provided by an online budgeting program. Possibly for the very first time you will fully realize why your personal budget and household budget are completely out of hand.

You might have a better understanding of just how much you are spending once you are able to see it listed item by item and day by day.

Consider this for instance. What if every workday you are spending $3, twice a day for coffee? It might not seem like much. But in actuality, that's $120 a month. Or, $1,440 a year. Wow! Who would have thought? Well for one, an online budgeting program will certainly think of that. As well as all the other minor expenses that bring chaos to personal and household budgets.

It's the single grains of sand that make a beach and all the seemingly insignificant expenditures that create a mountain of debt.

Sure, you know you have that big mortgage and car payment at the end of the month, but where does the rest of the money disappear to? Often consumers find that 10%-15% of their monthly income just gets eaten up and they have no idea where it went! Say your family income is $4000 a month. Wouldn't it be nice to find out where that $400-$600 is going?

Well, an online budgeting program will help you find it. They will also help you find a way to put that hidden 10% into a savings account once you have all your income and expenses in order.

Perhaps once you have all your expenses accounted for, you will see a list that contains many of these items:

--mortgage payment

--car payment

--gas and car repair

--food

--clothing

--work lunches

--entertainment

--children's allowance

--home insurance

--car insurance

--life insurance

--newspaper delivery

--haircuts and styling

--credit card payments

--utilities

--telephone

--cable hook-up

--everyday incidentals(like those 2 coffees)

There could be many other expenses as well, depending on your hobbies and lifestyle. Maybe you belong to a country club or health club. Possibly your children are involved in extra-curricular activities that require payment.

Whatever your situation, online budgeting will help get your personal and household budgets itemized and under control, so at the touch of a mouse you will have full knowledge of what you will be spending each month even before you spend it.

With the glow of your recent engagement not far behind you, it's time to take a deep breath, steel your nerves, and make possibly the most important decision as it relates to your wedding. The Budget. Why the capital B? Why the drama? The Budget affects almost every element and detail of your wedding. And in these uncertain financial times, a tighter control of your wedding budget is more important now than ever! From how cheap your wedding invitations will be, to whether you have a DJ, twenty-piece band or iPod as your source of music. It all starts (and ends) with how much money you are prepared to spend.

As you start down the twisty, confusing road of wedding planning, you'll soon see that The Budget is difficult to manage, hard to wrangle, and a cloud that hangs over every decision you make. The basic wedding budget tips offered here are to help you to achieve two main goals: 1) to help you get the most for your buck; 2) to prevent any "surprise" expenses. If you're an adult with your own income and budgeting is a new concept for you, you might not understand (or believe) in its importance. It's for this reason, I feel compelled to make the following claim: Budgeting is not the same thing as "saving" or "discounting". Those are activities you can achieve through coupon-cutting or hard-nosed negotiating. No. The point of budgeting is for planning. And the point of planning is to avoid the unexpected. And the point of avoiding the unexpected is to reduce stress. And the point of reducing stress...ok. You get it! I cannot overemphasize the importance of budgeting your wedding to you, so now that I've hopped off my soap box, here are my recommendations and ideas for you should consider your wedding budget.

As you plan The Budget, we have these essential tips for you:

1. Start with a number but give yourself a range. It's close to impossible to create a budget and hit it right on the bullseye. For this reason, we recommend you do what most big corporations do when it comes to setting your budget and that is to give yourself a range. Set three different scenarios and call them: low, medium, and high. As you go through your vendor negotiations and contracts, you'll see how the estimates you receive help you to achieve one of the three scenarios you've defined for yourself. It might seem a bit excessive - after all, this is a wedding you're planning, not the launch of a new business start-up! But like I said - A big part of budgeting is to prevent surprises. Giving your budget a range allows you flexibility while planning while still preventing surprise expenses .
2. Know the averages. Our site does its best to research what the "average" price for a certain wedding expense is. Why do we do this? One of the real challenges to a wedding budget is that your purchase decisions are made in isolation of one another. That's another way of saying: You buy your wedding dress from someplace different from your flowers. In fact, every item you'll need for your wedding comes from a different source. There's almost no such thing as one-stop shopping when it comes to your wedding. Knowing the average price for a certain item, therefore, allows you to see how the estimate you've received for a certain item compares to what other brides are spending these days. We know that no one wants to be thought of as "average" and we certainly do NOT want you to have an "average" wedding, but knowing what the industry benchmark prices are for large ticket items is an important way to ground your decision making in reality
3. Track your expenses. Back to the "avoid surprises" soap box. In order for your budget to work, you MUST track your expenses. And I mean ALL expenses. Not just the ones that show up on your credit card statement either. I'm talking EVERYTHING. Many non-budgeters are disillusioned by the budgeting process because of the tedium and discipline required to do it correctly. These people have difficulty with budgeting because they've never developed a system that works for them. A very simple system (and simple is always better!) is to keep a shoebox next to wherever it is you pay your bills (the kitchen table, on your desk, on the coffee table), and EVERY time you get an invoice or estimate, PUT IT IN THE SHOEBOX! Don't file it or alphabetize it. That will only add a step that will add to the tedium that will add to your list of excuses for not budgeting. Just PUT IT IN THE SHOEBOX. Don't have a receipt? Write down what you spent on a piece of scrap paper and PUT IT IN THE SHOEBOX. Once a week (or more frequently if possible), open up your shoebox, pull out the receipts, and add them up. Compare the number that you've come up with to The Budget that you decided on. If the number is negative, you know you're over. It's really that easy. To help you with this process, we've even created our own wedding budget spreadsheet that you can download and use for free!
4. Know the "all-in" price vs. the "bait and switch" price. I've worked in the wedding services business long enough to know that - for better or for worst - many vendors hide costs, or provide complicated pricing arrangements that make the final price tag hard to decipher. Some vendors charge rush fees for getting things done within a timeframe that most would consider slow! Some mark-up shipping and handling costs, or attach an excessive premium to hourly rates that go past the scheduled timeframes. And others might nickel and dime you with items you thought should be included (like vases for your flowers!). While it's important to know the itemized prices to your purchases, I feel it's MORE important to know the FINAL price. In other words: The number of dollars moving from YOUR account into your vendors. In my opinion that's the number that matters the most, and the one that should be PUT INTO YOUR BUDGET. As you have your discussions and you negotiate pricing with your vendors, make sure you are always getting the final price, and as many times as possible, ask your vendor to put the final price into your contract or estimate. I don't think it's inappropriate to go so far as to ask them to write: Final Price next to the dollar amount so there's absolutely zero confusion as to what you'll be paying. Remember what I said about surprises, right?

These are general tips to help you think through your wedding budget and all the things to watch out for. As you browse through our site and take a look at the articles we've posted, you'll read more specific advice on how to budget, negotiate or think creatively about specific items. After all, our advice on how to save a fortune on wedding invitations will be vastly different from how to negotiate with your wedding photographer!