Budgeting

When you're looking for ways to help with your personal financial plans, you will likely hear talk of a strategy known as envelope budgeting. Although it's straightforward and simple, envelope budgeting can be a very useful way to save your money.

What is envelope budgeting?

True to its name, envelope budgeting involves setting a budget for your various expenses, then using envelopes (or digital versions of them) to help you stuck to the budget.

To get started, you first need to determine your monthly budget & expenses. Some are easy, such as fixed installment payments like mortgage or rent, car payments, and loan payments. Others take some careful planning, such as grocery expenditures and "emergency" funds.

Once you've got a budget planned, decide how you'll do your budgeting. Some find that envelopes themselves make budgeting easiest, especially if you prefer working with cash. Software and spreadsheets are also available to help the more digitally inclined.

Each month, set out envelopes with the names of your budget areas and your budget for them. You might have a dozen envelopes labeled with expenditures like rent, utilities, phone, and others. Also be sure to write the budget amount on the outside of the envelope. And when you get paid, add the appropriate amount of money to its respective envelope.

When the time comes to pay your bills or go shopping, simply take the money from the appropriate envelope.

How can envelope budgeting help my personal budget?

By physically keeping your money separated into individual budgets, you help to make sure that all of your expenses are covered each month. Ever let a phone payment or utility bill slip through the cracks? With envelope budgeting, you make sure every expense is accounted for, and that the funds are available to cover them.

Envelope budgeting also helps you identify areas where you can save money. If you find that your dining out & entertainment costs are sky high each month, try moving some of that budget to your grocery envelope and some to savings. You'll save money, and keep things more moderate across the board.

We also recommend an extra envelope for emergencies & unforeseen expenditures like car repairs, appliance breakdowns, and other areas that can set you back if you aren't repaired. Add to this envelope each month, but only spend out of it when you need to.

Do I really need to use envelopes?

That's up to you! Some people find that using cash and envelopes helps them stick exactly to their budgets better. There are software programs and spreadsheet templates available to help you manage an envelope budgeting program digitally, which may be really useful for those whose paychecks are direct deposited.

If you are going to set up a household budget, you're going to need to prioritize your spending. You simply cannot buy everything you want. You have to purchase the things you really need first.

So, how do you separate your "wants" and "needs" so your household budget will be successful?

To set up a household budget you will need to do three activities:

- List your income.

- List your expenses.

- Set priorities and make changes so that your income will be greater than your expenses.

Listing your expenses is important because it allows you to see where your money goes. Setting priorities will help you control spending so it is less than your income.

You'll need to keep an accurate record of everything you spend. Carry a notepad with you so you can write down the cost and short description every item you buy.

You can group individual items into categories to make your expenses more understandable. Keep recording your expenses for a full month.

After a month of recording everything you spend, you're ready to set some priorities. This means that your household budget may reduce or eliminate spending for some items in order to make your expenses come below your income.

It's always painful to begin cutting back. But, you will probably be the first to admit that your spending has been somewhat out of control.

So, are there objective ways to establish priorities within your household budget that can help minimize the pain of setting spending limits?

=== Objective Standards for Household Budget ===

Yes. The primary contribution of respected psychologist Abraham Maslow was a hierarchy of human needs. This prioritizing of needs can give you some guidance for setting your household budget priorities. This hierarchy has been described in the following form (starting with the most important level):

1) Physiological needs (food, water, sleep, personal hygiene)

2) Safety needs (employment, security of income, protection from violence, family security, health)

3) Love / Belonging needs (friendship, family relationships, social networks)

4) Esteem needs (recognition, self-respect, sense of contribution)

5) Self-actualization (ability to use your talents, creativity, appreciate life)

=== Applying The Hierarchy to Your Household Budget ===

In setting up a household budget, you should allot money for items that satisfy the physiological and safety needs before allocating money for needs at other levels. Let's see how this works.

The physiological needs are the most important. You need food, water, sleep, and personal hygiene to survive. This helps set your household budget priorities.

Expenses related to these needs take first priority. Basic nutrition, shelter, and personal hygiene expenses take first place in your household budget.

Next in line are the safety needs. These needs include enabling you to support your family and keep them safe. Basic expenses for transportation to and from work, clothing for work, making your home and neighborhood secure (which include taxes), and health care are included here.

But, here is where you need to be careful.

Let's look at some of the household budget items included in these first two areas such as food (basic nutrition) and transportation to and from work.

It is easy spend more money than is required to satisfy these basic needs. You may confuse expenses for basic necessities with money that would contribute to recognition and self-esteem (need levels beyond the basic levels).

For example, buying nutritious groceries and making healthful meals at home helps fulfill your basic physiological needs. But dining out in fine restaurants goes beyond the basic needs. Frequenting fast food restaurants may be convenient, but is probably more expense than a simple nutritious meal at home--and fast food is likely to be much less nutritious.

You could also consider transportation requirements for work. There is a basic level of transportation that fulfills the requirement to safely and reliably go between home and work. And there is a more luxurious, and expensive, level of transportation that fulfills the self-esteem needs.

In setting up a household budget you must carefully consider how much to budget to satisfy these basic physiological and safety needs. Reducing expenses for some items may be inconvenient and seem a little harsh. But, if there is money left over after satisfying these basic needs, you can allocate money to other levels of needs.

So, let's say you do have money left over in your household budget after estimating how much you must spend to satisfy the needs in the first two levels.

You can then allocate money for "Love / Belonging needs". These activities might include family entertainment, occasional dining out, or for a family trip or vacation. Other items to consider here are cable TV, Internet, and attending a movie. You could also include magazines and newspapers in this category.

If you have money in your household budget left over after allocating it to this category you can allocate money to items that fulfill the next category.

When the money you can budget runs out, you know that spending for items not yet covered will have to be deferred. This is the part of making a household budget that seems painful. But, it also relieves you of the anxiety of wondering when the bill collector is going to call or the court is going issue a wage garnishment order.

So, you can prioritize the items in your household budget in a fairly objective way using Maslow's hierarchy of human needs. Maslow's hierarchy of human needs will help everyone understand your household budget, give it their support, and make it successful.

What Is a Budget?

The purpose of a budget is to give you control of your own money. With a budget, you actively decide what will be spent, and where your money can best be put to good use. There is nothing like the good feeling you get when you are in control of your money, rather than your activities and expenses controlling you.

What Is a Budget Plan?

A budget plan is a plan where you formally draw up a plan for expenditures for a given period of time, usually one year. The budget process includes all income sources and how that income will be allocated to expense categories. The biggest problem or hurdle with budget planning is to stick with it. Most families do not plan to fail, they fail to plan. A good plan will provide an excellent road map for success. A budget is just a tool and periodically, it needs to be fine tuned.

What Are Income Sources?

Do you know where your income is coming from and how much it is? Do you know what should be included as income? Here is a guideline regarding what should be included as income.

• Wages. This is your net pay from all paychecks. How do you get paid: weekly, bi-weekly (every two weeks), bi-monthly (twice a month) or monthly.
• Retirement income.
• Interest and investment income. Do not include this unless it is consistently the same yearly.
• Alimony. Do not include this unless you consistently receive it and there is no reason to believe you won't.
• Bonuses, a raise or overtime pay from your employer. Do not include these since they could be discontinued at anytime.
• Tips. Do not include this unless you can average the amount based on what you received in prior years.

What Are Expenses?

Expenses include everything you spend. Do you know how much you are spending for categories such housing, transportation, food, clothing, entertainment, child care, medical expenses, charity and debt? Are you overspending for non essentials and thus not able to meet your necessary obligations?

Based on US News and World Report for budget allocations, the following is a guideline for how budget expenses should be allocated:

• 35% Housing - Includes: mortgage or rent, utilities, insurance, taxes and home maintenance.
• 20% Transportation - Includes: car payments, auto insurance, tag & license fees, maintenance, gasoline, tolls and parking.
• 28% Other - Includes: food (12), clothing (3), entertainment (5), child care, medical expenses (5) and charity (3).
• 15% Debt - Includes: student loans, retail installment contracts, credit cards, personal loans, tax debts, medical debts and alimony payments.
• 2% Savings - You should plan to save this amount throughout your working years, with a goal to increase it to 10%.

How does your spending compare to the guideline? Or is it impossible to determine because you have no idea where your money is going and how to even categorize it?

Here is a list that will help you categorize your expenses.

Fixed ExpensesThese are expenses you have little control over.

Utilities: Phone, disposal, water, electricity, gas heat, sewer

Home: Mortgage (usually includes insurance and property taxes) if not, insurance and property taxes

Health: Dental, health, life, and eye insurance (these items are usually covered by payroll deduction) if not, than add them here.

Income Taxes: Include Federal, state, local and FICA taxes only if you are self-employed.

Additional Outstanding Debt: student loans, retail installment contracts, credit cards, personal loans, medical debts and alimony payments.

Non-fixed Expenses

These are expenses you have more control over.

Food: Groceries, lunch, eating out, snacks, and date night.

Child support: Day care, babysitting and alimony payments (if it applies to you).

Transportation: Gasoline, maintenance, repairs, tolls, taxis, subway, fees and insurance premiums for all vehicles.

Debt Payments: Credit cards, Student loans, other loans.

Entertainment: Cable TV, Computer expense, software, hobbies, dues, subscriptions, videos, movies & admission fees, amusement parks, and vacations.

Clothing: Children and parents.

School: Books, supplies, fees and gym expenses.

Pet Expenses: Food, Grooming, board, Vet shots (if this applies to you).

Miscellaneous Items: Toiletries, household products, gifts, church, other donations, grooming (haircuts, make-up etc.) birthday and anniversary cards, children's allowance, spouse expense money (amount for each spouse to be spent by them for any reason without explanation) and insurance premiums (not covered by payroll deduction).

Savings: Emergency fund, savings for retirement or children's college fund and vacation fund.

If you are still unable to determine how you are spending your income, keep track of your expenses for a couple of months or until you can more accurately list your expenses.

Create Your Budget Plan

You are ready to create your monthly budget plan. Using budget software or a Microsoft Excel spreadsheet will aid the process. The budget plan will be divided into monthly buckets. Take your total planned income for the year and divide it by 12. Take your planned categorized expenses based on prior actual expenses and divide the categorized expenses by 12. Enter your total income in monthly columns; then enter your total expenses in monthly columns. Compare planned monthly income with planned monthly expenses. The total monthly expenses must not exceed the total monthly income amounts. If expenses exceed income, planned expenses must be decreased. A good budget plan should show planned expenses less than or equal to planned income.

Share Plan with Family

Sit down with the entire family and provide them copies of the proposed family budget plan. If your children are under the age of 5, do not include them unless they are receiving an allowance. Go over all the details of the plan. Provide information on what will be done with raises, bonuses, and overtime income if received during the year.

Tell the family that this is a plan and is not cast in stone. Indicate that adjustments may be made during the year. Answer all questions. Get each family members buy in. Then, STICK WITH YOUR PLAN. If any major situation should come up, hold another family conference and explain to them the situation.

If you are single, make a commitment to STICK WITH YOUR PLAN. Make adjustments as needed.

What To Do With Amounts in Budget Plan Not Spent For a Given Month?

This is a real good question. As your budget plan is followed throughout the year, there will be months in which you will not spend a planned expense. When this occurs, do not spend this money on something for which it was not designated. Most families have a tendency to spend the money on some other item. To prevent this from happening, keep the unspent planned expense amount in a savings account. When the need for paying the planned expense occurs, the money will be available to transfer from savings into the checking account.

Conclusion

If you follow the process above you will begin to take control of your expenses and have a road map for greater success. As you continue the process year after year, you will see new spending control trends. You will become successful in controlling your spending. Remember, most people do not plan to fail, they just fail to plan.

Recent economic circumstances can teach us a thing or two about the importance of being on a family budget. We take a look at some family budgeting basics.

Some people don't budget because they don't realize the purpose of family budgeting. The best reason to be on a family budget is to keep track of your family's income and expenses. It's much easier to see what's coming in and going out when you put it in a family budget plan, rather than keep track of it in your mind. Budgeting helps ensure you're not overspending and that you're making the best use of the money that comes into your home. If there are spending leaks, creating a budget can help you figure out where the money is going. Budgeting also helps you plan for major financial goals like vacation and holiday spending.To start creating your household budget, add up all your income for the month. Multiply weekly pay by 4 and bi-weekly pay by 2 to come up with the monthly income. Include any alimony or child support you receive. Include dependable sources of income only. That way you're not basing your budget on money you might not receive.

Total the household expenses. Write down all the things your family spends money on each month. Then, list the amount you spend on those things. Expenses go beyond utilities and other bills. Your family budget should include other types of spending like groceries, transportation, entertainment, etc. Remember, to write down all the things your household spends money on to get a complete picture of how your family is spending money. The small amounts of money you spend when you order checks or buy something out of a vending machine may seem insignificant at first, but they can add up over time.

Don't forget to income irregular and variable expenses. These are those expenses that aren't due every month, like insurance premiums and property taxes. You should continue to include these things in your monthly budget and set aside the money for expense so when it's time to

pay, you don't have to break the bank to cover it. If it's a semi-annual expense (due every 6 months), divide the total amount due by 6 and write that into your monthly budget. Or, if it's an annual expense divide by 12.

Bring your net income to $0. Your net income is the total of your expenses subtracted from your income. If net income is a negative number, then your expenses exceed your income. You should cut your spending in some areas to keep from overextending your family budget. On the other hand, if net income is a positive number, you should put the extra in savings or use it to pay off debt or both. Once you have a zero net income, you know all your family's money is accounted for.

Don't forget to save. An important part of your family's budget is putting money aside for the future. Not only should you save and establish an emergency fund, you should also save for retirement, college tuition, and even the annual family vacation. You're more likely to contribute to savings if you include it in your family budget planning, rather than not.

Track your spending. At the end of each month, review your spending to see if you followed your budget. If you went over in some areas, make sure you included enough money in your budget for that area. Otherwise, be more cautious next month to make sure you don't overspend in that area. The trouble with overspending your budget is that you may not have enough money to meet all your financial obligations. If you notice that you've overspent in one area, you'll need to cut back in another area to keep from spending too much.

It's OK if your family budget changes. In fact, your budget should change, especially as your family changes. Updating your budget helps make sure you continue to make the best use of the household's income by planning appropriately for your future expenses.

Creating A Business Budget is very similar to creating a personal budget. However there are some differences. One of the most important aspects that you must understand when you own a business is that taxes are not directly taken out of your income, which makes your income and any quarterly tax payments extra important to track. Tracking and knowing your Income & Expenses timely will assist you in determining your estimated quarterly tax payments (if applicable) and in the development of your Business Budget (spending plan).

Developing and having an accurate and realistic budget will assist you in making accurate spending decisions and make it easier to predict profits. Which means the more frequently you track your costs, the better! Having a Business Budget will assist you in knowing and understanding where your business is going.

Here are 5 recommended steps for creating your Business Budget:

• Step 1: Determine how frequently you want to track your costs and income. Generally, it is advisable to choose every week or every month. At first it may seem like a time-consuming task to track and enter your spending every week, but it will pay off in the long run and as you become accustomed to it, you'll find that it really only takes you a few minutes every week. Establishing a simple systemusing spreadsheets to track your cost and income usually makes it easier to update daily or weekly.
• Step 2: Determine your expenses. This means your operating costs like your phone and web hosting fees, the costs of your taxes, the costs of outsourcing and the costs for marketing, publicity and so on. Best way is to make a list of all categories you anticipate having costs and all areas where you already know your expenses and include these in your budget.
• Step 3: Now the fun stuff! You get to predict your income. The best bet is to predict on the conservative side. That way if you have a bad month, your budget is not blown; however, when you have a good month, and you will have many good months, you will have extra money to work with.
• Step 4: Track your expenses and income and review your budget often. To get the most out of a budget plan, you will need to track all your business expenses and income. Remember, your budget is not set in stone. It is a living breathing thing that will change as your business changes. If you find you have spent more in one category, analyze and make adjustments in your budget (moving money from an expense that is at lot lower than you budgeted to the expense that is over budget). A business budget is not a strict regimen or diet, it is a spending plan.
• Step 5: Track the difference between what you do spend (actual) in each category and what you planned (budgeted) on spending. Realize that in the beginning, it is likely that you'll have more expenses than income. This is normal for most start up businesses. This will help you predict the future and allow you to keep your budget realistic and accurate.

Having a Budget in your small business is good business. Without a budget you become unable to make the most accurate predictions, which could lead to keeping you from having your business profitable and going strong. If you're serious about being a successful business owner, you can NOT do without a Business Budget. The good news is, it does not have to be difficult. A simple spreadsheet and a little time can make all the difference. Get Started Today and Improve Your chance of being successful in your business adventures.

To Your Success In All That You Do and Dream Of....

©Kim Parsley

Something More Publishing

I have been preparing business budgets and forecasts for many years and worked for many different bosses. Not every boss has the same kind of approach and personalities when working with budgets and forecasts. I like to share my experience with you here.

1. Spokesman Boss

He is a fluent speaker and could easily talk his ways through any meeting. Usually he just need to know the final budgeted numbers and some key figures and assumptions of the budgets. He is not a technically sound spreadsheet and software expert. He depend on his subordinates to give him the supports and prepare the details of the budgets. He can give key figures and explain how to achieve them and his subordinates will translate them into financial numbers.

When working of a Spokesman Boss, you need to be technically sound in spreadsheet or software. You need good experience is preparing budgets as your boss will not be able to help you. You will get very good support from this type of boss as he cannot do budgets without your help. But be sure that you do not overshadow him especially in front of his superiors. Play your card right and he can reward you by talking his way through the management.

2. Paranoid Boss

He has many things to worry and fear. He has low self confidence especially meeting up with the management and discussing the budgets. He often load himself with a lot information and get his staff to do a lot of unnecessary works to get him ready. In most cases, the management would only discuss a small of all the information that he has gathered. This creates a lot unnecessary times and works to his staff. A lot of the information are either piled up on this table and collect dusk. The staff are usually not happy with his style of management.

When working for him, you require a lot of patience. Because he is paranoid meeting his superiors, he is too fearful to fight better benefits for you. Instead he will just accept what the management give to him. So do not expect high salary increment and big bonuses when working for him.

3. Trust No One Boss

He trust no staff and only believe in himself. He is technically sound in spreadsheet or software and have hand on experience in preparing budgets from A to Z. Because he has taken a more senior role, he has staff to help him to prepare budgets. But he demands that the budget must be prepared in accordance with his ways, processes or steps. If you are a resourceful staff or have your own ways of preparing budgets, you will find yourself clash with him if you do not follow his ways. The most difficult part is that he will tell you briefly and verbal what he wants and he expects you to know what he has in mind especially on the templates and methods. Even if the final budgets are correct and methods that you used is different from his, he will give you a good lecture for not following instructions.

You need a lot of patience working for him. The best way is to review his previous works and following exactly how he did it. No use improving his methods as it will only make him angry. If you want to recommend as improvement, seek his consent first. Do not expect him to give you good performance appraisal as no one is better than him in the department.

4. Last Minute Boss

He like to please the management and has a lot personal times to spend in the office. He think that by getting his staff to work long hours and on holidays, the management will be happy. He likes to give budgeting works or assignments to his staff either ten minutes before office off times especially on eve of an off day or holidays. Not that he is too busy to give you the assignments. It is just his nature to get you to work after office hours or on your off days. Sometimes he demanded that you do not claim off day allowances or overtimes. Everything he tells you is important and must be completed in a short time. Sometimes you get frustrated when you see all your hard works over the night or weekend just piling up on his table waiting for him to review in his own sweet time.

If you can adapt to his style, you will find working less strenuous. But if you cannot stand his style, just change job. It is impossible to rationalize with this kind of boss.

These are just some of the bosses that I have encountered during my working years on budgeting and forecasting. Although it may or may not apply to you but it is interesting to read about.

Budget Car Rental company, known as Budget Rent A Car System, Inc, has been renting out automobiles since 1958. With 1900 locations worldwide, Budget Car Rental is one of the best known rental companies in the world. The company is a subsidiary of a publicly traded corporation, the Cendant Corporation. Cendent is a global provider of services for business and consumers alike in both the travel and real estate markets.

Budget Car Rental was originally created in 1958. The idea was that a company needed to exist for the "budget minded" renter. The company took off, and today is a leader in the car rental industry. The company attributes its success to continuing to appeal to budget minded renters by offering quality vehicles and great customer service.

Budget car rental not only rents out cars to the budget minded traveler, but they also rent out moving trucks for hauling. With the same philosophy that helped the car rental business to take off, Budget car rental has managed to become one of the leaders in the moving industry for those looking to get a vehicle to use to move them. Cheaper than a mover, the company offers trucks in a variety of sizes in addition to rental and purchase of moving accessories like boxes, tape, dollies, straps, and cloths to cover your belongings in the move.

When it comes to car rentals, though, that is where budget care rental really shines. For many people, selecting from the models of cars, trucks, and SUVs they have available is the best part. Budget offers small, medium, large, SUV, and specialty vehicles for rent. Small cars refers to compact economy models, mediums are intermediate full sized sedans, large are premium luxury sedans, SUV.s are full sized, and specialty vehicles include vans, mini-vans, and convertibles. So there is something there for everyone.

As for location, budget car rental can be found almost anywhere you might need to rent a vehicle. They are readily available at most every major airport worldwide. They are also available in many high traffic locations and near auto repair centers so that renting a car to use while yours is being worked on is quick and easy. In many cases, the cost may even be covered by your insurance company.

Budget car rental also is a great partner for website affiliation or if you are a travel agent. For those who want to advertise Budget on their website, commissions are earned each time a rental is made from their site. Travel agents can also sign up to earn commission and rewards when they help to book rentals through Budget.

Budget Car Rental [http://www.fairviewjournal.com/category/automotive-comments] is one of those great American success stories: a small company growing into a big corporate money maker. The company offers a good service in many locations and with a wink to the budget minded traveler. Budget deserves at least a look from those who are moving, need a car for vacation, or are needing a partner for their website.

"OK Finance, here's your budget. Purchasing, here's yours, Operations, yours. Any questions? All right, thanks for meeting, let's make this year a profitable one."

For decades companies have been budgeting around functions, usually in the form of departments. The assumption has always been that if we hold our departments or functions to a specific budget, the whole place will run more efficiently. But does it? When a department head has a budget, and works hard and meets that budget, does DOES the company do better?

I am going to show you that it does NOT.

And that's not all. Not only does functional budgeting automatically limit the financial performance of the organization, but it also DRIVES division, PROMOTES conflict, and REWARDS selfish behavior. Really.

The Budget What's the purpose of a department budget? Well, let's break it down. First, a budget provides a guide for decision making. Whether a manager is buying supplies, allocating staff, purchasing equipment, or planning for employee training, the budget sets up the priorities the director should use to make the final decision. Second, a budget provides accountability. A solid budgeting approach means that the manager will be held accountable for the budget decisions made. This doesn't just mean "Did you stay within budget?", but it should also include "Was it the best deal? Will it last? Does it do the job?" Third, a budget helps set the culture of the organization. The items in a budget define what the company thinks is important. Do we want high customer service levels? Items in the budget should reflect that. Is employee retention important to us? There should be budget items that provide for employee satisfaction. Fourth, and usually most important to executives: the department budgets, collectively, should limit organizational expenditures and promote efficiency among departments. After all, that's why a lot of executive thought goes into "which department will need the money for what?" This fourth purpose is the most faulty in functional budgeting.

Driving Division The first thing a functional budget does is to focus attention on the DEPARTMENT. Not on the core process, not on delivering a quality product, not on smoothing flow through the organization - but on meeting my department budget. Consider the thought process that follows receipt of the new budget by a manager when the budget is tight, as is the case in many organizations in the United States today... "Gee, how am I gonna pull this off? I've got to schedule staff, but I've got to we don't go over budget; there's a lot of money tied up in payroll here. Wait, Sally just got chewed out for going $1000 over budget last month, she's gonna lose her bonus for that. I'm not gonna have that happen to me. Ha! I can cut staffing a little on the night shift, and that will save me a bundle. Hmm, that'll mean we may not have everything ready in the morning for Bob's department, but that's just tough, he'll have to learn to live with it."

Promoting Conflict Now, if there's not a lot of communication between departments, it may be a while until Bob finds out, but he WILL find out, because his own staff will let him know. Ever hear anything like this? Bob: Doggone it Doug, your folks didn't have the stock ready when we started up the line this morning! What's going on? Doug: Listen Bob, they've cut my budget this year, and I can only put five people on at night. I'm sorry if that causes a problem, but it's just the way it is. Bob: But how am I supposed to meet the quota, you know we've got that big shipment due this Friday? Doug: I wish I could help you, but this is the best we can do. Sorry! Bob: @#$%&@%!!

Rewarding Selfish Behavior That same tight budget can have interesting effects on supply departments, especially when there's an incentive tied to it. All right, I've got the budget numbers, and my people are gonna flip if I can't find some way for us to cut supply costs. How am I going to do this, I don't want to hear griping all year long... I know, Pterydactyl Supply has that leftover shipment of 5.8 volt batteries they made for that European company that went belly up. Sue said she has a whole shipload of 'em in the warehouse, and she'll cut anyone a deal who will help get them off her hands. That would bring us in $10,000 under budget 'cause we use a ton of the things - even if ours are usually 6 volts. I'm going to look VERY good to the CFO! And so, we're back to the conflict again: Irving: Sam, is anything going on with the batteries? All our testing equipment is starting to act funny. Sam: Nothing special. I just took a whole year's supply in and saved the company a lot of money. They're a little bit lower voltage, but it's small enough that it shouldn't have any effect on your equipment. Are they lasting as long as the old ones did? Irving: Well, they last just fine, Sam, but the readings are erratic, and it's making us have to redo a lot of the testing. I'm not even sure that the last batch of product was all within specs. Sam: It's probably not the batteries. I think you'll have to look somewhere else to find the problem, Irving.

Needless to say, the costs in rework, down time, and lost customer satisfaction were astronomically higher than the original savings. And guess what? This was a REAL case the really happened!

For budgeting to drive performance, it has to be built around processes, but that's another story.

It is hard enough to get the motivation to start budgeting. When you have a direction and helpful tips to get you started the journey can seem a little less daunting. The most important thing to remember even above the tips below is just take action. Use any and all budgeting tips you can find to get started.

With out any further delays... Here are 3 of the best budgeting tips I could think of!

1. First set a goal for yourself.

Sit down and think about where you want to be in 3, 5, and 10 years. For each of those time frames try to map a plan of how you intend to get there. Figure out what you need to do to reach your goals. Having goals is at the top of my budgeting tips because you have to start somewhere and I have always been taught to begin with the end in mind. Creating a goal and taking steps to reach it is doing just that.

2. Get a bird's eye view of your financial situation!

In this budgeting tip, I wanted to really impress upon you the importance of taking a step back and looking at the overall situation. Sometimes this can tough to do because your bills are sitting there right in front of you demanding attention. It can tough to take a step back and look at your financial situation objectively. Believe it or not, this is the best thing you can do to resolve your financial troubles.

3. Make changes now!

Avoid procrastination! This is a huge budgeting tip. Why? Because most people know that they have financial troubles but rarely do they take the steps to rectify it in a timely manner. What tends to happen is they take action but they take late in the game, which makes it harder to fix the their financial problems. Budgeting is all about timing and execution. When you take action and what you do is the key to creating a budget that will work for you and your situation.

The budgeting tips above are just the tip of the iceberg. I have been coaching and teaching people how to budget for over 10 years. I have seen the differences in people that have been successful with budgeting and those who haven't. These tips by themselves may not resolve your financial woes, but searching and acting on information is what will.

When it comes to determining financial goals and budget constraints, utilizing a budget calculator is essential. Although a traditional calculator can be used to figure out a monthly or weekly budget, a well designed budget calculator from a web site focused around financial planning software makes the job more simple, flaw proof, and accurate.

A proper calculator for a budget should include a slider view and input field view in order to give the user options in calculating their financial resources. Slider formats are great for making a quick calculation while minimizing the amount of typing needed. Input fields, however, are more accurate and tend to be used when exact calculations are necessary in determining a budget.

Even with slider and input field view options, a series of numbers can be difficult to make sense of. Look for a budget calculator that gives a pie chart for annual expenses in order to understand where your money is going. A graphical image can give users a good sense of how to construct a monthly or annual budget. Consider finding financial planning software that includes a calculator for your budget in order to make the most of your hard earned cash.

Software for financial planning, however, can bog down a computer and even require some upgrades in hardware. Online software and tools, however, use a website's own servers to make calculations, allowing your computer to do very little of the work. For instance, a calculator for budget constraints might cost quite a bit of money and use up a good amount of computer resources, but an online tool is capable of tabulating budget results for little to no cost.

Sometimes, however, online tools such as a budget calculator have very few options to help you determine an accurate budget. Choices between monthly and annual calculations as well as input fields for mortgages and scheduled expenses are best when figuring out a budget. Learning where your money goes each week as well as each month is absolutely vital in understanding the realities of an individual's financial life both short term and long term.

A budget calculator found online, however, is likely to be a fairly simple tool that limits accuracy. In order to calculate finances more accurately, look for an online financial planning software that includes fields such as living expenses, other expenses for miscellaneous expenditures, as well as home mortgage payments, property taxes and more. Allowing for a few generic fields such as other monthly payments or other expenses can also be a good addition to a calculator for a monthly or annual budget.

Determining a monthly and annual budget is vital in securing one's financial future. Look for financial planning software that is capable of creating an easy to read picture of your budget restraints and financial life. Online tools that cost little to nothing tend to be a good option for starting a financial journey and determining budgets and annual financial concerns. Using a budget calculator is a good way of figuring out where your money goes, and where it should go in the future.

Envelope budgeting- what it is?

As the name suggests, envelope budgeting includes planning a budget for your different expenses included in a month. After this, the envelopes will assist you to adhere to the budget.

1. To begin with, first of all, you should decide your monthly expenses and budget for different categories of expenditure. Some are simple like fixed installment payments such as loan payments, rent or mortgage and car payments; whereas others acquire some watchful planning, like emergency funds and grocery expenditures.

2. Once your budget is planned, you have to make a decision, as to how to go for your budgeting. It is seen that envelopes make budgeting very effective and easier, particularly when you choose to work with cash. Spreadsheets and software are also available that can help a lot.

3. Every month, specify the names of budget areas to the envelopes, along with your precise budget for them. It is possible that almost dozens of envelopes will get labeled with various expenditures such as phone, electricity; utilities and rent etc. Specify the budget amount on the outer side of the envelope. Further, when you get salaried, put in the correct amount in the respective envelope.

4. At the time to go for shopping or paying your bills, you can simply pick up the particular envelope and set out.

Is the envelope budgeting helpful for my personal budget?

Answer to this question is obviously yes. By sorting and keeping the money in individual budgets or envelopes, it will assure you that all of your expenditures are covered precisely every month. By means of envelope budgeting system, you ensure each outlay is accounted for, and that the necessary resources are available to envelop them.

In addition to this, by means of envelope budgeting, you can recognize areas where money can be saved.

So, what are you waiting for? Start your quest towards envelope budgeting system now!

Budgeting set-up depends on the function of the hotel or facility. A hotel or facility can be smaller or larger scale operated. The larger they are the more complex it gets.

In a smaller scale hotel or facility usually there is Front Office, Housekeeping and Maintenance and the expenses are controlled mainly by the Owner through the General Manager. They were the key decision maker in preparing the yearly budget with the assistance of an accountant or accounting firm. The budgeted amount needed to operate for the whole year is based on the expenses incurred on the previous years and other related occasions that will affect the preparation of budget for the coming year.

In a larger scale hotel, expenses can be very complicated since the operation varies from the departments created for the smooth operation of the hotel. Some international hotels, the budget is being prepared by each department head through the assistance of the Financial Controller and General Manager then submitted to the owner/ corporation for approval. Once sanctioned, each department head is then held accountable in ensuring that the budget allocated is monitored and controlled based on the occupancy percentage. The General Manager gets a copy of the results of the budget every end of the month and discusses them with the department head.

Example of departments in a larger scale hotel are: Administration, Front Office, Housekeeping, Laundry, Engineering, Food & Beverage, Kitchen, Finance, Human Resources, Recreation and any other departments created to suit the function and smooth operation of the hotel. Each of these departments have sub-departments such as Front Office with Reservation and Bell Service/ Concierge; Housekeeping with Laundry, Uniform, Linen, Tailoring, Flower shop, Gardening and Landscaping, Upholstery shop (the latter can be assigned to Engineering as well); Engineering with Carpentry, Masonry, Electrical, Mechanical, Computer Technician etc.; Food & Beverage with Banqueting and Outside Catering; Kitchen with Pastry shop; Finance with Purchasing, Receiving & Storage; Recreation with Swimming Pool, Golf Course, Tennis Courts, Spa etc.; Human Resources with Training and Clinic.

Housekeeping and other departments in the hotel operate within two types of budget. The Operational Budget and the Capital Expenditure Budget.

1) Operational Budget is the allocation of expenses for each item/s required by the department in order to operate smoothly. In case of hotel operation, control of expenses are based on occupancy percentage. The budgeted amount for the month can be variable since there are certain period where occupancy forecasts in other areas or countries are unreliable or unpredictable.

The basic Housekeeping operational budget are as follows:
a) Staffing
b) Linen & Towels
c) Guest Supplies & Amenities
d) Cleaning Supplies
e) Laundry Supplies
f) Machine, Tools & Equipment
g) Decoration
h) Miscellaneous
i) Printing and stationeries

There are budgeted item/s or sections in Housekeeping that are usually divided between other departments such as follows:

1) Repairs and Maintenance

This type of operational budget is usually divided between housekeeping and Engineering

2) Uniform Budget

Uniform expenses is prepared by the Executive Housekeeper with all the elegance, comfort, durability, styles, colors and functionality of the uniform chosen for each department. Once a specific style of uniform has been chosen, it is then coordinated with the concern department and when the Executive Housekeeper gets the approval she then submits them to the General Manager for overall coordination of styles, colors, functionality etc. that reflects the proper image perception of the entire hotel in the eyes of the guests. The last step will be to endorse them to the Financial Controller for allocation of budgeted amount to each department.

3) Decoration

Housekeeping is one of the department in the hotel which helps and assists in the beautification of the hotel inside and outside the building. Decoration can be flower arrangements, fresh and artificial depending on the policy of the hotel since there are hotels that prohibit the use of artificial flower arrangements for fire hazard issue, picture frames, statuary, carvings, tapestry, artifacts and many others are examples of decorations. Requests for flower arrangements seemed to be the most needed items in the hotel whether for the guestrooms, Food and Beverage functions, Outside Catering, Lobby of the hotel, Convention centers and other areas that requires flower arrangements.

4) Printing and Stationeries

Front Office and Housekeeping are the two departments that share this budget.

5) Miscellaneous

This type of budget can be charged between Housekeeping and any other department depending on what type of expenses is incurred.

The second type of Housekeeping budget is Capital Expenditure (CAPEX)

Capital Expenditure Budget is the allocation of funds for a specific project or items that will help and assist the operation of the hotel. In case of Housekeeping, projects can be something that require replacement or additional Housekeepers cart, Laundry washer & dryer, building a new Laundry Shop for outside customers, replacement of vacuum cleaners, replacement of worn out beds or furnitures which is usually done floor by floor or by segments. Usually the CAPEX fund is allocated same way as how the operational budget has been allocated for the coming year. Therefore on a yearly basis project/s is/are accomplished and completed especially if the item/s have specific life span where replacement are made specifically each year. This way the hotel or facility is well maintained, equipped and preserved like new. It is through CAPEX fund that maintenance of the hotel works best and at the same time avoiding depreciation of items in large quantities where it is difficult to resolve since they require huge amount to achieve.

Therefore in order to have a smooth operating and well maintained hotel or facility, it is important that allocation of funds for the operational needs and maintenance of the hotel should be handled and monitored effectively based on occupancy percentage where key department heads are knowledgeable on how to adjust their budget accordingly. Key Personnel responsible for the preparation of the budget should see to it that the allocated fund is spent specifically for what it is intended for. Side tracking the set goal will be an unending tasks that won't have a definite or specific achievement accomplished. Not being able to monitor the operating budget effectively will lead to the demise of Capital Expenditure.

Capital Expenditure Budget is as important as Operating Budget when it comes to hotel business.

Nonprofit organizations often prepare yearly budgets for operations with numbers for the following year. Many develop budgets based on income first and then expenses, while others start with expenses and then work on the revenue -- it depends on the nature of the organization. In order to develop a good budget you need to be realistic and detailed-oriented.

The first step is to print out current revenue and expense detailed report by account and use that as your basis for the future. For example, if you see rent expense of $1,000 a month, then you should budget for this amount for the following year, unless you know that the rent will increase or decrease in the near future. You need to look at each account and try to forecast the best you can about the following year. This type of work is often done during the last months of the prior year, so that any trends or new information is included in the budget. Although budgets are usually done once a year and then the numbers remain static, there are instances where budgets are changed and re-approved by the Board during the year. This may happen when a nonprofit loses or gains major funding, making the original budget obsolete.

Nonprofits receiving government funds incorporate grant budgets as their own. Organizations also need to consider government cuts and how that would affect operations. Nonprofits should always budget for more revenue than expenses to allow for cuts and unexpected expenses. Once budget numbers are approved by the Board and entered in the accounting system, the next step is to get actual vs. budget numbers in reports. Be sure to look at budget variances for the month and year-to-date. If you only look at monthly numbers, you may miss variances that may be small on a month-by-month basis, but significant for the year. For instance, if you see that your revenue is down $10,000 this month, it may not mean much, but if you compare year-to-date actual to budget numbers, you may have a $100,000 hole in the budget that needs to be corrected by using funds from prior years or by cutting down expenses.

Note that many nonprofits count on restricted funds to operate and that's when confusion may starts up. When developing an operating budget, differentiate between restricted revenues and others and be sure that donor documentation supports the decision to use restricted funds. You cannot unilaterally decide to use restricted funds -- the donor must have given express permission for the money to be used a certain way. Some organizations have separate budgets for capital expenditures to be used in major construction or other major project. Keep the operating budget separate and review both,l looking for discrepancies and double counting. For instance, you may receive funds to construct a school and that should go towards the capital budget only -- not towards operations. In some cases, the same funding may show up in two different budgets by mistake. Look out for those that can create a major problem.

Are you ready for the new year that is right around the corner? How wonderful...a brand new year lays at your feet. What are you going to do with it?

Take a look back at January of last year. Compare where you were then with where you are now. Check your progress. Are you happy with it?

Another year gone by. Sigh. It's scary how fast it went.

Are you better off than you were last January? Are your relationships more rewarding? Is your bank account bigger?

"You may delay but time will not." Benjamin Franklin

You are too old to waste time. You have an opportunity to create the life you want starting this year, right now. It's time for the "B" word. "B" stands for goal setting. "B" stands for planning. "B" stands for...BUDGET.

And it's time for you to get over your "B" word problem. You know you are supposed to put a budget together, right? Have you? Have you lined up last year in numbers and dollars? Have courage. I'll help you. I have struggled with this. I learned how to budget only because I HAD to. And so do you. If you don't set goals and measure your progress, your business won't get any better. It will get worse! Yikes! Together, we can get through it. Here are some tips for putting together your business budget for this year...and beyond.

Getting Started...

• Start...by stopping. Stop whining about budgeting. Stop claiming you can't do it. Stop claiming you don't get it. Budgeting is your best guess at what you can do for sales and expenses for a future period of time. That's all.
• Don't worry about doing it just right. You can't do it 100% right, meaning you will never guess exactly what you will have in sales and expenses. You can't do it wrong. Any swing at doing a budget is a positive move.
• Realize your power. You are incredibly powerful, so much more so than you realize. Writing your goals, crafting your budget, actually sets your goals into motion. You have everything to gain and nothing to lose by budgeting. So, let's go!

Tools to use...

• Your accounting program probably has a budgeting program in it. Use it. It will do the math for you.
• Do you provide plumbing, heating, cooling, electrical, over-the-counter sales and septic tank pumping? Create a budget for each entity. Use the departments feature in your accounting program.
• Columnar pads are your friends. You know those green tinted sheets with the rows and columns inked in already? There is nothing wrong with using a pencil and paper to work out your budget.
• Print out your Income Statements (aka Profit and Loss or P&L) from the last two years. If you don't have them, find your income tax returns. Your tax preparer created an income statement for your tax return. You can also have your check book register handy.

Basic Budgeting Steps...

• Create a reasonable chart of accounts. The chart of accounts should reflect YOUR business. Your accountant may encourage you to use THEIR chart of accounts. Doing so makes it easier for him to do your taxes. He should accommodate you and your business by helping you create a chart of accounts that is plumbing-business specific. I've attached a sample chart of accounts for you to use. Show it to your accountant and customize it to reflect the action at YOUR company.
• Simple budgeting involves goal setting for sales and expenses (costs.) Start with account number 4-1000 and work through the rest of the expenses. Of course you can add other expenses. This is just a starting point. More sophisticated budgeting involves the balance sheet items...assets, liabilities and equity (accounts 1-1000 through 3-9000.) If you are new to budgeting, start with sales and expenses. Address the other items with your accountant after you have done that.
• Find a Budget Buddy. Doing your budget with someone else is a GREAT idea. Two sets of eyes will catch more math errors. Two brains will help you think out your assumptions. And, making an appointment with another person to work on the budget will discipline YOU to keep that appointment. Budgeting is easy to blow off because it's not an urgent activity. Who should be your Budget Buddy? Another business owner is good. You can also work with one of your employees on the budget. Don't be afraid to share your financial information with a key employee. Their financial literacy makes them more valuable to your organization.

There are two ways to approach the sales line of your budgett:

1. Set a sales goal... and work from there...and
2. Fill in all your projected costs, and then see how much sales will have to be to cover costs and leave your desired profit.

• Either way is OK. If you start with the sales line, and there is not enough on the top to cover all the expenses you anticipate, you can go up to the top line and change your budgeted sales to make it work. Remember...the Budget is pretend. It's a guess. You can move the numbers around.
• Work your way down the list of costs and make your best guess. Reference your income statement, tax returns and check register to see how much you have spent on expenses in the past.
• You can fill in the budget for the whole year, or month by month. Month by month is a more usable format when it comes to checking actual performance to budgeted numbers.
• The budget is just goal setting. It doesn't need to be bound by strict accounting rules. You can budget for expenses you haven't incurred yet. For instance, if you want to set aside money for buying a new truck, you can budget for it first...and then buy once you have the money saved.
• Keep a Budgeting Log. You are going to pull some of your budgeted numbers from thin air. Write down notes to yourself as you come up with the numbers for your budget. When you refer to your budget in the months to come, you may forget your assumptions. Write them down in your Budgeting Log. John Young, venture capitalist and marketing maverick, helps me put my budget together for Benjamin Franklin Plumbing. He gave me this great piece of advice: Don't put down budgeted numbers that you KNOW won't happen. For instance, if you KNOW that your insurance costs are going to go up this year, don't put down the same dollar amount as you paid last year. If you don't know the increase amount yet, find out...or put in an increased number from last year. But don't put in the same number...because you KNOW that won't be it.

Use it or lose it...

• Don't bury your budget in a drawer once you consider it "done." A budget is a viable goal setting...and getting...tool. Each month, compare your actual performance to your budgeted performance. Even better, check MID month. Check your progress on the 15th of the month. If you are behind in sales, take action to crank up sales...and to cinch down expenses. If you don't refer to your budget until after the month is over, you may miss the opportunity to salvage a month.

Once upon a time, I taught skiing at Park City Ski Area. A client signed up to take a week's worth of ski lessons with me. As an instructor, a week of lessons is a big money maker. Still, I had to turn him down.

I told him, "Listen, you are only going to be here for a week. If you take lessons every day, you'll miss the chance to just SKI. You need to learn a bit, and then go practice. Have fun. Make some mistakes. Try things out on your own. If you only take lessons, you'll miss the point: YOU want to SKI." We settled on a few lessons with some free time in between.

So...go forth and budget. You know more than you think you do. Don't avoid budgeting because you are not sure that you know how. This stuff isn't that hard. If you aren't super comfortable with it, you will avoid it. Or, claim you don't "get" it. But you get it enough to give it a swing. This column has enough information for you to get started. Put together a budget for 2008. Check your progress against it each week. And have some fun out there on the steep slopes of business.

This year, let the "B" stand for BIG BUCKS!

For more help...visit http://www.barebonesbiz.com

or call 877.629.7647....We make business basics EASY at Bare Bones Biz!

Thomas Paine, the great revolutionary writer, is supposed to have said 'People don't plan to fail, they fail to plan.' His words of wisdom can certainly be applied to budgeting. Planning (together with foresight) is acknowledged as the best way to avoid financial problems. A well-planned budget helps you to collect and use information about the day-to-day functions of your business and to spot problems before they derail your business plan. Here are the steps to follow in developing your next budget...

1. See budgeting as a vital management tool.

Your budget process consists of three main parts-forecasting revenue and expenditure, recording actual revenue and expenditure, and reporting and acting on variance between the two. Budgets usually evolve from business plans and, therefore, will change over time. Your first budget may be nothing more than a statement of targets. In subsequent years, with established benchmarks and an improving track record, you'll be able to make more accurate projections. Eventually, your budget will provide a detailed, accurate comparison of your actual and desired performance.

2. Consider revenue and expenses separately.

Avoid trying to balance your receipts to expenditure in the first instance. Revenue is a product of your business plan and will have a 'lag' component-a start-up period before the cash starts flowing, anything from a couple of months to a couple of years, depending on your business. Expenses are your costs of resources and they will probably dominate in the early days.

3. Identify and list expenses.

The first step in costing your resources is to identify what those line items might be. A useful definition of a line item is one to which a monthly dollar value is assigned, such as office rental and rates, staffing wages and benefits, advertising, utilities such as telephone and electricity, vehicles, travel, legal costs... Many of these items are fixed expenses and this makes the task relatively straightforward. Begin by selecting broad headings and list in detail the line items or resources associated with each. Under 'Administration', for example, you might include stationery and office rental. Under 'Utilities' may be listed electricity and telephone.

4. Forecast revenue.

Revenue is sales. So, using your business plan as a guide, make projections regarding the sales you hope to generate. Those projections will represent a target and should be broken down into monthly and weekly components-the smallest possible denominator, the better. Don't ignore historical data when setting those targets; and consider factors like the economy, inflation, whether your industry is growing, and any new technology that may improve productivity.

5. Prepare working papers.

Working papers are detailed calculations-cash-flow projections- that provide the monthly figures budgeted for each line item of revenue and expenditure. Produce separate working papers for each line item in the budget; this may be as simple as month-by-month predictions of revenue to be generated from one aspect of your business. Jottings may accompany individual papers as attachments. When a review of your budget is called for, your working papers will be a valuable source of information. For example, you may find that your revenue calculations were unreasonable and thus were contributing to a budget shortfall.

6. Check for variance.

Variance between your budget and your actuals must be identified and acted on regularly. Ensure that the person responsible for maintaining the financial records is provided with a clearly documented list of individual components designated as line items. Using such information, this bookkeeper can logically record the actual transaction that can then be compared with the budget. Any variance, positive or negative, between actual and budgeted, is highlighted in a budget action list for follow-up action.

7. Prepare a budget action list.

A budget action list is a result of the comparison (usually at month's end) of the actual versus the budget. Note any variance on the budget action list leading to a reassessment of the budget workings, to an amendment of the recording of actuals, or to action so as to address any variance.

8. Prepare a budget report.

A written budget report is a 'hands-on' summary, prepared on a monthly basis, setting out major variance between actual and budget items. The report should account for any variance and recommend relevant actions. The report is forwarded to the boss or nominee who will either confirm the actions recommended or suggest alternatives. 'What action is needed?', 'Who will take it?', 'When is it completed?' These are the outcomes of this reporting and review process.

9. Use your budget to measure performance.

If you base your budget on your business plan, you will be creating a financial action plan. This can serve several useful functions, particularly if you review your budgets regularly as part of your annual planning cycle. Your budget can serve as:

o an indicator of the costs and revenues linked to each of your activities,
o a way of providing information and supporting management decisions throughout the year,
o a means of monitoring and controlling your business, particularly if you analyze the differences between your actual and budgeted income.

10. Use your budget to help finance your business.

Potential investors or lenders will want to know how they are going to be repaid, and that's where your budget can help. Your budget gives you credibility, shows how your business is traveling, conveys the type of business needs you have to meet, and identifies the resources you must have to be competitive.

At the end of every fiscal year companies tallying up their scores to see how they've finished. Unlike the game of golf having the highest score is cause for celebration, being in the black you've done well and deserve some congratulations. If there isn't a soirée going on in your business maybe it's because you didn't plan for a year-end party, and that could be the direct result of your failure to budget.

To be successful in business, budget cannot be a taboo word in your company. One of the skill sets you as an owner or manager need to possess is the ability to plan ahead, this includes that ability to budget. If you're a visionary and lack budgeting skills, then stop reading and go find someone who is. So before we discuss budgeting tips, let's first discuss what a budget is and isn't.

What a Budget Is:

A budget is a proposed plan to monitor financial activity over a period of time. A budget is a planning tool an owner and/or manager should be using to measure trends over a fixed interval; this includes inflow, outflow, and asset/ liability growth. Finally a budget is a resource to forecast an assumed outcome.

What a Budget is NOT:

A budget is not the law; it is not to be used as a means of accountability and to ensure financial integrity. A budget is not to be used a ceiling to spending, and a method of absolute control. And finally a budget is not a guarantee so financial and business success.

So now that we have defined what a budget is, let us get to how to properly use and understand how a budget actually benefits a company.

The budget should be put together and approved at least 1-2 months prior to the start of the new fiscal year. This will allow for key employees to look at what the company is trying to accomplish and what is being aimed for. So for this to happen planning will need to take place approximately 3-6 months before the start of the new fiscal year, this of course depends on the complexity and size of the company.

The budget should reflect the direction that the company is headed in; this of course is handed down by the CEO and/or Board of Directors. Everything about the budget should point towards the strategic plan the company has adopted. The budget should also be multifaceted, not only should you include a Profit & Loss operating budget, but also a Balance Sheet budget to help track cash inflows and outflows.

Finally the budget should be realistic. An exponential increase in revenues without any foundational proof or purpose can lead to fiscal year failure. Again remember the budget is for mapping out trends in an attempt to forecast growth or decline. All the pieces must fit, in business there is usually a cause for increased revenues (hint: check for the reason in your expenses section!).

To summarize let's recap the key points:

1. Budget is not taboo

2. Budget is a proposed plan

3. Budget is not the law

4. Approval should allow for time to disseminate throughout the company

5. Reflects the strategic plan and heading of the company

6. The budget should be realistic, for all growth there should be a reason

Everyone makes budgeting mistakes. It can take several trial and error months to get it all right. Budgets are constantly evolving. You have to work hard to find one that works for you. But there are mistakes you can avoid.

Here are the top nine mistakes that people make when budgeting:

Mistake #1: Using preset categories that fit someone else's personal spending habits, not your own.

You can't cookie cutter yourself into what anyone says your finances should be. Work with your spending and your goals to form a budget.

Mistake #2: Inaccurately setting your income level.

Look at what you are making right now. What is your take-home pay? Don't project your future bonus into your income until the bonus is in your hands.

Mistake #3: Too few categories

You can't have a budget that doesn't allow for groceries or gasoline money. It isn't an accurate picture of your spending. Have categories for each of your costs. You don't have to be detailed down to the cent, but don't leave things out.

Mistake #4: Forgetting yearly expenses.

Remember to include the expenses that don't occur on a monthly basis, such as personal property taxes, service contracts, homeowners insurance and so on.

Mistake #5: Not tracking your cash spending.

Cash is one place where money leaks right out of a budget. It disappears really quickly and, often, you can't remember where it went. Make sure you right everything you spend down or keep receipts for record keeping later.

Mistake #6: Forgetting to budget in savings.

You need to treat your savings just as you would any bill that must be paid. Remember, pay yourself first? That applies to your budget. Take out the savings before you spend money.

Mistake #7: Not sticking with it.

Budgeting takes a commitment and a good attitude. You have to be willing to review and change your budget as needed. You need to look at it several times a week to keep it fresh in your mind. Make it a priority. After all, it is the one way your financial goals will be realized.

Mistake #8: Writing unrealistic goals.

Budgeting isn't all about your spending. It's about your goals. You may be wanting to save for a house, buy a new car or get out of debt. Others are looking to retire well and put their kids through college. Whatever your goal, you need to set it realistically. Sit down and really look at what you will need to do to reach your goal. Then put your plan into action.

Mistake #9: Feeling bad over mistakes.

We all stray. It happens. Budgets aren't set in stone and can be evolved. If you are feeling guilty about constantly breaking your grocery budget, perhaps you aren't overspending, you are simply under budgeting. Remember, you have to spend money sometimes. Do it and get on with getting your budget to work for you. Keep moving forward towards a budget that will work for your goals and finances.

Keeping track of our hard earned money is something that a great majority of us have trouble with. It's as if we spend it faster then we make it and by the end of each pay period we are left wondering where it all went. Learning to efficiently manage money is something everyone needs to know, but unfortunately most people are never taught this most valuable of skills.

This is where a budget is most valuable. It gives a starting point in which we can all learn to properly manage our money. Let's look at it this way. Most businesses and corporation have a budget, even the United States government has a "budget" (okay, bad example), but individuals and families seldom follow any sort of budget. In this day of overwhelming debt this is not good.

The first thing you need to do when starting a budget is to set a goal. What do you want your money to do for you? Do you want to get the spending under control? Get out of debt? Save up for a big purchase? Put money into retirement accounts? If you have a specific goal or goals it is much easier to build a budget around that.

Most people who start a budget just want to find out where their money is going. As you list out your expenditures you will begin to see patterns. Some expenses you just have to live with like a mortgage or utility bills. It's when you start looking at all the little expenses and how they add up they don't seem so little anymore.

If you start cutting out some of these smaller daily expenses, like the daily morning coffee for 4$ a pop, you may begin to see that you do indeed have extra money at the end of the month. The point is that it is the small items that add up over time and this is what causes the most financial problems for many people. If you buy that cup of coffee on the way to work everyday that turns out to be $80 a month or $960 a year. Add a few more small regular purchases into that equation and before you know it you are spending thousands of dollars a year on coffee, sodas and other things.

Here's another secret to keeping your budget going. If you are using your budget to help pay off credit card and other debt then list out your debts from smallest to largest. Once you pay all your minimums on all your debts take any extra money that is left over and send it to your smallest debt. Yes, that's right, the smallest one. You'll be amazed at how quickly you pay that one off and it will give you motivation to move to the next one.

Staying motivated is best way to keep using a budget to find that financial freedom you always wanted. After all, it is our behavior with money that causes most of our financial problems in the first place.

Why a budget is so important

A wedding can potentially be one of the biggest expenses in a couple's life. That is why it is critical to create a budget when you first start planning. And even more important, the budget needs to encompass all possible expenses, even the small ones. Particularly in today's economic times, it is important to save where possible and not spend more on your wedding than you can afford. You don't want to start your married life with debt because you didn't plan your wedding expenses accordingly. With all the different bills and expenses related to a wedding, the question is, where do I start?

Where to start

Start your budget with a general idea of what kind of wedding you want. How many people would you like to invite? Is it a local or destination wedding? Where would you like to have the ceremony and the reception? Generally speaking, the reception is one of the biggest expenses for the wedding. Start by calling a few places and asking them to give you a ball park figure on the price per person and other costs related to having a reception at their venue. With a few choices to select from and an idea of how many people you want to invite to the wedding, you can get an idea of how much the reception will cost.

What items are included in a budget

You cannot include too many details in your budget. You should start with a list of standard items. Search wedding planning websites for a basic list. Some of these sites will suggest a percentage of your overall budget that you should allocate to each item. If you would like to take your wedding planning a step further, sign up for online wedding planning software. There are several sites that will help you keep your budget on track. They will give you a list of items to start with and a suggested "spending limit" for each item based on your overall budget. In addition, the software should give you a place to customize your budget based on what is important to you. Lastly, the software should help you compare your personalized wedding budget against the actual amounts you are spending.

What items are most important in a budget

Most people will not be able to afford to have the most expensive vendor for every part of their wedding. Therefore, it is important to get an idea of what is most important for you and your fiance and choose those vendors first. Maybe having excellent pictures is your top priority. Look into a few top notch photographers and get an idea of how much you might need to spend on photography. Then see if you can potentially cut expenses on your other vendors to make room in your budget for your top choice. You may be able to cut some items from your budget entirely. Some people feel that having a great wedding video is not that important. For example, you may be able to find a friend with a video camera that would do it for free. That would give you more money to allocate to your photographer.

Staying within the limits

The key to keeping your budget on target is to keep close tabs on your ACTUAL spending. It is easy to overspend just a little in each area, which could cause you to be over A LOT in your overall budget. You may also find that you are able to spend less in some areas than you originally anticipated, which allows you to splurge in other areas. Rank the items in your budget from most important to least important. If you go over your budget in one area, you can find an area where you can cut back that is not as important to you. This will ensure that you stay within your limits. Weddings and all the events and celebrations that surround them are expensive and can add up quickly. Keep an eye on your budget and update it every time you spend money or get a quote. A budget can quickly get out of control if you don't watch it. Having a plan and sticking to it will help take some of the stress off the wedding and make it more enjoyable for those responsible for the bills.

Many people don't like budgeting. It's often thought of as a negative exercise that only highlights all the wrong things you've spent money on and now have a lot of work to recall, record, tally and justify. And most of these folks dread the fact that they have to go through this same ordeal every month. It's not surprising then that they view budgeting as an onerous routine. When budgeting is approached as a one-time, marathon-like project occurring only one day in a month, I suppose that budgeting as a routine can be quite burdensome. But budgeting doesn't need to be. In fact, I propose that making budgeting into to many more smaller tasks that all occur on an even more routine basis will make the whole budgeting activity much simpler and enjoyable to do.

Rethinking Budgeting
Budgeting can and should be much more productive and meaningful than the once a month exercise to find and dump data into all of the prescribed spreadsheet cells by a certain day. Budgeting should be approached as the series of tasks you do to meet and exceed your financial goals. A much more effective money management approach would be to see budgeting as a process, comprised of routine of planning activities and a routine of tracking both your savings and all the expenses against what was planned.

Savings As A Pleasant Routine
Make the very first check out every month to yourself either by direct deposit or some other automatic means. It's your money and you deserve to benefit from it. Start with a general savings first, then set aside other specific savings accounts for any/all specific savings objectives; i.e., a new car, a vacation, a fancy night out, anything you feel motivated to save for. Also put a timeline with a few mileposts (like halfway there) on each objective. Hold yourself accountable to attaining the most important objective all the way down to the least and celebrate each objective that was attained.

Making Fixed Expenses Routine
Fixed expenses are regular bills that come to you at known times with consistent amounts. Quickly and simply write down which regular monthly bills are due when. Rent due on the first of the month may be easy, but other fixed expense bills are a bit more challenging to recall. An example might be your auto insurance due every six months on February 15th and August 15th. Instead of allocating the entire auto insurance amount in the months it's due, simply make those larger, longer-separated payments more routine and easier to handle by setting aside 1/6 of the anticipated semi-annual bill every month. This tactic requires a bit more discipline, but is one of the means for making the entire budgeting process simpler.

Adapting Variable Expenses Into Routine Budgeted For Expenditures
Variable expenses are 'irregular' in that they are not pre-known amounts due at regular intervals. These likely include items that you buy on a constant basis such as groceries, gas, even utility bill you pay, but also may include all kinds of optional or discretionary spending from Christmas gifts, to movie tickets to speeding tickets (if you have a lead foot issue)! The point is that these are all the 'other' expenditures you make beyond your regular bills during a given month. The best routines to follow here are to set a estimated budget for as many spending categories as you can find in your last 4-6 months of spending. Again the more specificity here the better i.e. the notorious whipped milk coffee drinks we all seem to make room in our spending habits for (I'm guilty too). If you do too, simply create a monthly budget for coffee. For each budgeted for item, create a labeled envelop and as often as each day, simply file every receipt you collect into the proper envelope. And with every receipt, just add to the running total on a blank slip of paper also included in each envelope. On the monthly budgeting day, simply record the final total for each expense and compare to the planned budget amount. Once you have a fine-grained view into all your spending, certain unnecessary expenditures should become apparent. In fact, look for as many of these money management opportunities to save as you can, especially if you are near to, or beyond the monthly net income you can reliably count upon.

Using this set of simple to follow routines, budgeting should become a highly effective process for managing your money. After only a few months of developing these positive routines, you'll come to appreciate what a good practice, budgeting can be.

Planning the Budget

In the previous exercise, we have identified all costs and all income and now have a clear picture of the current situation. Using this information, the budget we set will, in effect, be an overview of how we live our lives from this point on. There will be certain rules that we have to stick with, but we will know that sticking to the rules will allow us to achieve our future financial goals.

The next part of the process is a little more painful and certainly more laborious than the last, but nevertheless must be done. Begin with the easy stuff first. This is the middle section on the budget sheet, i.e.:

- motoring expenses;

- food and housekeeping;

- miscellaneous goods and services;

- personal and leisure;

- sundries and emergencies.

There will be lots of low hanging fruit here (easy savings to be made).

For example, let's say your daily expenditure diary reveals that on your commute to work you buy a newspaper at the railway station and a coffee while you wait for the train. You buy lunch at the deli around the corner, but go to the local pub for a sit down lunch and a drink on a Friday. You have a drink with colleagues after work on average 2 nights a week and buy an evening paper to read on the train on the way back from work. This is what this expenditure looks like over the week:

Morning coffee: 1.50 x 5 = 7.50

Morning paper: 0.60 x 5 = 3.00

Lunch at the deli 2.50 x 4 = 10.00

Bar lunch: 7.50 x 1 = 7.50

After work drinks: 2.80 x 2 = 5.60

Evening paper: 0.50 x 5 = 2.50

Weekly total: 7.50 + 3 + 10 + 7.50 + 5.60 + 2.50 = £36.10

Look at this again. Every single item is discretionary, yet it will cost you £144.40 in a 4 week month.

You may not be able to give everything up on the list, but taking a flask of coffee to work with a packed lunch may be a start. Many newspapers now offer yearly subscriptions that will cut the weekly bill by more than half - if you still need to have a newspaper every morning and every evening (do you?). The pub lunch could be dropped and the drinks with the colleagues after work cut back to one drink one evening a week - still sociable enough for most people.

In this example we might get back something like £130 per month. If there are two of you doing it, it might be more like £260 per month.

You need to do this type of breakdown and cost reduction exercise on each line item. Drop things like takeaways to a once a month treat and (if you do not already) learn to cook and cut out ready meals and other prepared food. You will not only save money, you will find you start living healthier too.

Examine closely how you do your motoring. Could you mange with one car instead of two? Could you get rid of the gas guzzling 4 x 4, which would reduce insurance, maintenance, road tax and fuel bills - all at once? Hopefully you are getting the idea by now.

Once the individual figures have been reviewed and cost reductions identified, you can put the new figures into the budget sheet and we can now start to see the new budget taking shape.

Next we can look at the first section. That is:

-housing costs;

-rates and utilities;

-important household services;

-personal insurances.

These are largely fixed costs, but there are opportunities here too. Housing costs such as rent or mortgages can be reduced. Mortgage deals can be switched to take advantage of new lender deals, or fixed rate schemes taken on if interest rates look like rising in the near future. The term of the loan can be extended or (if things are really tight) payments dropped to interest only for a while. You need to ask the question.

If you are renting, could you manage with a smaller property, or a one in a less fashionable area? Could you move closer to work at the same time and reduce daily travelling costs?

Take a look at what seems to be fixed costs such as personal, or household, insurances and compare rates and benefits. Deals in this area change literally every week.

Gas and electric costs can be reduced by switching supplier or, better still, turning down the heating and switching off lights and appliances when they are not being used. Focus on this for a while and you might be pleasantly surprised at the difference it will make.

And so on.

The last cost section is the credit card and unsecured debt one. Much like insurances this may be a more flexible area than you think. If your credit rating is good then you have lots of room here to take on new cards and deals with 0% interest rates. Make sure when you do this that you close down the accounts you are transferring from. That is, you do not increase your overall indebtedness, or availability of debt.

If your credit rating is already poor, or bad, this may not be an option for you, so you will have to find other ways to reduce your repayments. One thing that creditors like to see is that their debtors are in control of the situation. A well put together budget sheet like the one we are in the process of outlining here can be a huge help.

Using the budget sheet you can identify all income and expenditure that needs to be made before handling your unsecured debt. This will leave you a set amount that can be used to negotiate reduced payments to your creditors.

This is a separate subject in its own right, but showing you are in control of your own finances may allow you to negotiate a reduced payment plan with the companies concerned.

Any other thing you can do in this area to consolidate debt and reduce overall interest payments needs to be examined closely.

However, you need to resist the temptation to make any loan consolidations that involve using your property for security. There is probably another way, so explore the other ways first.

The last section is income. You may have been tough with yourself in the cost section, but the other dimension to the budget is of course income. The more you increase your income, the less you need to cut back (or the bigger the benefit if you do).

Whilst writing 'increase your income' is very easy for me to do, in reality it is much harder to do. However, there may be opportunities you had not considered which may be worth exploring such as overtime, weekend shifts, unsociable shifts, additional responsibilities that could be taken on, or even a second job. Switching jobs could also be an option as could be starting a completely new career.

In other words increasing income is not always about getting further up the greasy pole, sometimes it is about taking a sideways move into any area you had not considered before.

One last point on income: while you have the budget sheet in front of you it is worth evaluating the cost of work. In other words, when you add up travel, parking, fuel, dry cleaning, child care, work wear etc then subtract it from your income - that will give you a true figure of what you earn.

Finalising the Budget

The above represents a substantial investment in time and effort. The end result will be a budget sheet which is accurate, personally optimised and which puts you in control of your own finances.

Having made this effort, you should now have identified specific allowances for each item and you now need to be sure that money is allocated each month to cover those items whether they occur weekly, monthly, quarterly or yearly.

It is unlikely that you will be able to reduce all of your costs, move house, change jobs, etc, all at once, so you may have recognised already that this budgeting exercise can be a progressive thing that happens over time.

Therefore, to begin with, you will need to ensure that costs are under control and, as a minimum, outgoings equal income. Over time you will look for cost savings and income increasing opportunities and, once taken advantage of, you can then revisit the budget sheet, put in the new figures and move on.

One completely free benefit to all of this is that, once it is all complete and you are sticking to it, you get a full night's sleep whenever you want.

Next

Sticking to the budget

I can still remember my first lecture in Management Accounting. The lecturer was introducing us to the concept of budgeting and at the end he made a little joke, which went something like this: "If your budget has turned out exactly right, you have either had an amazing stroke of luck or got it wrong!" Of course, what he meant was: budgets are not meant to be accurate. They are there as a guide - an important, essential guide that should act as both a planning and control mechanism.

I try to avoid the word budget with my new clients but I would like to introduce you to the real meaning of budgeting. Forget about the concept of restriction and restraint often associated with household budgets and start thinking about your finances in the same way that good businesses do.

The glue that holds all successful business practices together is the master budget. It ties in all facets of the business - marketing, selling, financing, research and development, and personnel management. Without a good master budget that incorporates all activities of a business, an organisation will end up floundering. And a floundering business is rarely profitable.

The budget provides the cohesion between the differing objectives of diverse parts of the business and creates a unified goal for the total organisation to work towards. It enhances motivation, delegates responsibility and provides important feedback on the progress of individuals and the organisation as a whole. Not bad, for a simple system that we all thought someone installed to punish us for our mistakes.

Budgets are not punishment. They are important, useful tools that guide us to where we want to go. They allow us to plan for our future yet control our circumstances along the way. They are not meant to be exact, but rather flexible and accommodating. They should change when we change, but still be resilient enough to prevent us from going off the rails. They point us in the right direction and correct us when we fail. Without a budget for our finances, we are trying to win the 100-yard dash blindfolded.

People make mistakes. We have human weaknesses that cannot always be perfected. As good as our judgement may be, there are times when we can go off course. We can be tempted, we can be deluded and sometimes we just slip up. What we need is something that keeps us on the right road without invalidating our past mistakes yet motivates us to try again. And again, and again - until we get it right.

I have had clients who tried the Money Program but left after a couple of weeks, only to return to me months or even a year later, "Sorry, Annie, can we try again?" Sure. It took me a couple of years to perfect the program when I first developed it for myself. Sometimes, I left it for weeks or even months, returning to my old spendthrift ways, but eventually came back to the program with a greater knowing that the only way I could get ahead is to work within the system. A good system will allow you to do this. This is called "Correction, without Invalidation." In other words, keep trying and correcting your mistakes without making them wrong.

What we need is a system that allows us to deviate off course at times but builds in controls to prompt us back whenever we veer too far - a system that facilitates correction, without invalidating the mistakes we made on the way.

First, you need a plan. A plan incorporates objectives, goals and step-by-step strategies or action plans. An objective is a high-level, qualitative statement describing a desired outcome. For example:

"To be financially independent and free to travel the world."

A goal is a quantifiable statement that is measurable and specific. For example:

"To create an independent income of $30,000 per annum, so I can leave my current employment by by a certain date."

The action plan then becomes your step-by-step approach of how you can create the independent income by that date.

If your objective is your life's dream - to travel the world - then the sacrifice of saving will not seem so daunting. We are all willing to make small sacrifices over time, if we have a greater goal in mind.

Another critical aspect of budgeting is comparison. We need to always compare what happened to what was supposed to happen. If you have a budget but never go to the trouble of comparing your actual expenditure to the budget, you are only using 50% of the system.

It is important that on a regular basis you compare your actual expenditure and outgoings to what was budgeted. Use the variances as a feedback mechanism to gauge your progress. It is OK to have variances. Remember the immortal words of my Management Accounting lecturer - budgets are not meant to be exact, they are used as a guide.

The variances will tell you how you fared. Was your budget realistic? Did you under-budget? Over-budget? If the budget is unrealistic, modify it. Budgets should be dynamic tools, changing where necessary until you get the right mix.

Did you overspend? Underspend? Was the budget reasonable but you simply broke the rules and fell back into bad habits? That's OK, the variances will guide you to where you need to focus your attention. Did you waste too much money at the supermarket? Spend too much on discretionary items? Are your fixed costs still too high? Correction. Correction. Correction. The variances will show you where.