Budgeting

There are so many personal finance programs and books on the market, trying to decide where to begin can make your head spin. Besides the myriad of options on the bookshelves and internet stores, there are dozens of popular, national programs that can cost hundreds of dollars. I've seen people spend over $100 to $150 on such programs and upon completion ask the question, "okay, how do I get started." I find it unbelievable to spend that much money and time on a program and still not know how to get started.

Most of these books, programs and seminars focus on the much larger picture of Financial Planning and wealth building which are great resources to pursue after you get your spending under control, paid off all your debt, live within your means and have money left over to invest. To get started in the world of personal finance, most people just need a simple budgeting program to help them get started.

I'm also a proponent that budgeting should not be a "look back" to previous months spending and then model that for the coming months. If you're overspending and base your future month's budget on a bad model, you really don't have a "going forward" budgeting strategy. It will be extremely difficult, if not impossible, to accomplish your financial goals.

My definition is that budgeting is a set of learned behaviors that help you manage your expenses relative to your income and provide you with a strategy and discipline to get out of debt and reach your financial goals.

To be successful, it's important to start with what your goals are and what motivates you and write them down. Then you can analyze your income, expenses and debt with a budgeting tool to figure out how you can get on track to meet those goals. The last key component is to have some structure and discipline to your budgeting process so that you review it regularly and track how well you are progressing toward your goals. I summarize the 3 components as:

• Motivators / Goals
• Knowledge (i.e. "how to")
• Discipline

Once you've got the understanding that budgeting is more behavior-based than analytical, then it's time to research the types of budgeting tools that are on the market to meet your requirements. If you're already an expert budgeter and want a tool to also track your investments and wealth building strategies, that's very different program than someone that just starting out looking for a simple, inexpensive budgeting tool. There are just a few categories of budgeting tools available:

• Pencil, paper and calculator(Cost: $0 if you have a calculator)
• Computer Spreadsheet such as MS Excel (Cost: less than $20 for the forms; MS Excel extra if not already installed on your computer)
• Budgeting programs such as Quicken (Cost: You will shell out $40 for just the Starter Edition, $60 for the Deluxe and $90 for Premier
• Online budgeting programs such as mint or Mvelopes (cost: mint is "free" but look out for the safety risks. Mvelopes has a per month charge)

Do some research on the web to find out which category of budgeting tool is best to meet your needs. A good budgeting coach can also work with you to provide solid advice on what's best for your budgeting needs and match your skills to what's available on the market. Whatever programs and tools you select, remember it's all for naught if you don't alter your behavior. Motivation / Goals and Discipline will get you to your end goals.

When a couple gets married, there are many challenges that they will face, not the least being financial, and it would be wonderful if they all acquired a good home budget software program to begin. Unfortunately, this seldom occurs. Marriage can be and often times is, a difficult adjustment to make for both, and those couples that don't plan sometimes take on a very heavy debt load right from day one, that quickly turns into a nightmare. They buy a large home with an equally large mortgage and try to fill every room with new furniture immediately, which is usually purchased using credit cards. It's not long before the high mortgage payment and very high credit card payments become very difficult to make, and the stress begins to take its toll. In the event an unplanned pregnancy occurs, the stress becomes even higher, leading to marital problems. This is no way to begin a married life together!

This type of problem can be avoided in most cases if proper planning is implemented. The couple needs to discuss these financial matters prior to marriage, and then use a home budget software program, and plan for the large purchases, instead of leaping into an ocean of debt that eventually will take its toll. Preparing a workable budget is probably the most important matter that a newly wed couple will undertake. Not all individuals are able to control their spending patterns, so preparing a budget together and discussing it every step of the way is paramount. In my role as a financial consultant, I have seen these scenarios play out time and again and they are not pleasant. Planning for children is even more important because when they begin to arrive, many additional needs will be required. Besides the day to day needs being provided, schooling, including college, expenses should be budgeted as well. How can all of this be accomplished?

But how does one go about it?

There are a number of methods to use, but we think the best way is to use a good home budget software program. It really isn't much different than using a personal budget software program, since you are basically using both incomes, assuming both spouses are employed. We reviewed many of the popular programs and came to the conclusion that those that used the "zero-sum" method work much better in the long run. The one that we recommend on our website uses the previous month's income to budget the current month's expenses, and every dollar is put to "work", leaving a zero balance. It is similar to envelope budgeting, and in addition to budgeting normal expenses, there are envelopes for debt reduction, savings, and special purchases that you will be saving for. The folks that developed this great program don't leave you "high and dry" after your purchase either. During the month, they have Free live webinars on the software where you can ask questions. Also, they have a member's forum where you can see other questions answered, and you can also ask your own for a quick solution. All I can say is that it works and does the job!

We can't emphasize strongly enough for all couples entering marriage, or for that matter, everyone else, please prepare a good financial budget. Prepare one that you can work with to plan and provide for your family's security and financial well being. There are goals that should be set, with a plan in place on how to attain them, allowing for unusual and non recurring items. We realize that preparing a budget for the first time can be rather difficult, and a little tedious, but it will be well worth it when it is in place. Using a good home budget software program will be a big help in that regard.

Small businesses have to be careful when it comes to their finances because one small error, like ordering too much inventory, could spell financial disaster. That's why budgeting and forecasting tips for the small business are incredibly important for the small business owner. Knowing how much money can be spent and on what is the most important thing for a small business to stay afloat. Two things that can help small businesses with this include forecasting software and budgeting software. Installing this information on your computer will allow you to keep track of the business's past, present, and future and forecast different trends not to mention manage the budget. The following information will show you just how important budgeting and forecasting are for small businesses.

First of all, any time the business needs a loan a budget will be required before any financing is offered. The reason this is important is because lenders want to see where money is spent and overall where money is being made. Also, when you use a budget you will always know how much you can spend, what risks you can take, and how your business is doing at a particular time. When you create a budget for your business you will need to sit down with last months' bills to include them in the expense portion of your report. You don't want to just throw out random numbers. Instead, you want to know for sure the number you are using are ones that correspond to your business. In your budget you will also want to include expectations, or a forecast, of your business' growth. If you don't know how to do this on your own then the forecasting software will really help you. Make sure you include the individuals in your business who know the information you are looking for. Sales managers, accountants, and the like can offer you information on your business' growth that you can include in your budget.

Once you have your budget created you will need to review it to make sure that what you have makes sense. Also, while creating your budget you need to decide if you will be creating a monthly budget or even a yearly budget. The more information you have the better off you will be. Plus, the budgeting software will make this really easy for you as long as you have all the necessary information to plug in. When your budget and forecasts are completed you can have a good look at the situation your company is in and if things go as planned how the company will be in the forecasted time period.

8 Things That Are Undermining Your Budget Efforts.

Do you want your budget to succeed? Of course you do, why else would you be budgeting if you didn't want it to succeed. You may not be aware of this but there are factors that limit your success with budgeting, as the old saying goes to be forewarned is to be forearmed. In this article, I will highlight 8 issues that 90% of people will have to deal with when they are budgeting. Identifying and overcoming these 8 issues is essential to your efforts to stay on the right track and achieving your budgeting objectives without hindrance. Without further ado the issues.

1. Failing to set an objective - Many people who have set out to budget will attest to this issue, a budget which has no clear goals defined will quickly fizzle out. There is no way that you can honestly expect to stick to a budget for any length of time if you have not set a clear goal for it. You have probably heard this before, but budgets are just like weight loss programs, they are simple to implement, but get a tad difficult to stay on till the end. You have to have a desire to succeed - your objective should be your main source of determination to see things through.

2. Inability to adapt to changes - I do not mean this in a negative way, what I am trying to say is that when on a budget most people are trying to live within that budget sometimes to their detriment, everyday life on a budget is not a source of scintillating excitement, truth with most things in life, Subtract the pleasure from your favourite past time and you'll dislike it a whole lot more. The point I'm trying to make here, make an allowance in the budget for all the things you love and enjoy currently. You are a lot more likely to stick to the budget over the long term if you can still enjoy yourself, and don't deprive yourself. Take away point leave room for all the things you love and enjoy in your budget.

3. over budgeting - Over budgeting is what happens you cut back excessively, essentially you scale back way more than is necessary, and you wind up depriving yourself of necessities in order to achieve whatever goal you have set faster. Bottom line is that it is fine to scale back but do not scale back so much that you deprive yourself of things that you may want or need.

4. Unexpected/Unplanned expense - Life can be unpredictable, and of course no one is able to predict when emergencies or unplanned obligations will crop up; however what you can do is prepare yourself in the event that any unforeseen circumstances do creep up. For this reason it is beneficial to establish an emergency fund so that you have a means to cover any unexpected expense that life throws at you, as they say "Fortune favours the prepared".

5. Outgrowing your budget - Good news you have achieved your goal, and you have accomplished what you originally set out to achieve with the budget, Congratulations you have developed and exercised some will power. Don't fall back to old habits too quickly, why not carry on budgeting, whilst expanding your horizon, and imagine more grand goals and aspirations for yourself.

6. Having unattainable goals/expectations - quite simply it is hopeless to stick to a budget, when your end goal is unrealistic. All you are doing is setting yourself up for frustration and unnecessary hassle. Your budget has to have a purpose which is both measurable and plausible. If you can't measure it refrain from having it in your budget.

7. Neglecting to control your expenditures - Failing to monitor and rein in your expenditures, spending is the equivalent of cutting your nose off to spite your face. Tracking your expenses has all the appeal of climbing Mount Everest but in reality, it's not really that difficult. When you understand exactly where the money goes, it helps keep you in control and makes following the budget through to completion far easier.

8. Succumbing to "must have it now" syndrome - I have left this till last, as it is often the biggest hurdle to overcome, and it is a hard one to get under control; Living on a budget can be an enlightening experience, it shows you how susceptible you are to your whims. You can never tell when or how you are going to be tempted. If you impulsively fell like you need to shop, a method of maintaining control is to employ the need vs. want rule ask yourself "do I need it or do I just want it?" and be brutally honest with yourself. If that doesn't curtail your desire, you could also employ the 2 day rule, it's quite simple, you hold off purchasing anything for 2 days, and if you still feel that you absolutely NEED it after those 2 days, then by all means go out and buy it.

Personal budgets can help you manage your personal finances so you can avoid the stress of having no money when you need it the most. Handling your money well can also help you avoid the painful and embarrassing process of filing for bankruptcy. To be able to budget your money, you will need to know how to handle your money. This information is available from various sources, including how-to books. Below are a few things you should keep in mind to help you get started in making the budgeting process work for you.

Personal budgets

Basically, a personal budget is a financial plan that sets limits on the amount of money that you will spend on your needs in a given period of time. What you should include in your budget are things like your income, any debts you might have, your savings and other forms of funds that you may possess. After knowing the amount of money you can spend, it is now time for you to list your expenses and to assess whether your income can support your lifestyle. Seeing how you spend your money can then guide you in making changes in your life so you can end up with more savings that can help you secure a stable future.

Budgeting Tips

If in case you do need to make some changes in your lifestyle, there are a number of ways you can lessen your expenses. One of way of doing this is to automatically allot 10 percent of your income for savings. Saving your pocket change can also help you save money, as the coins can add up to a substantial amount of money.

In making your budget, you should plan your spending before designing the budget and not the other way around. Most people make the mistake of tracking their spending after making a budget and they usually end up with nothing to spend at the end of the month. You should also be able to pay bills according to your budget, as this will help you plan your consumption. Another way of saving is to avoid credit as much as possible so that you would not have to pay interest. Lastly, it is a very good idea to buy at stores that offer good food at lower prices. Doing this can result in more savings for you.

It is very important to budget our own finances so that you would not have to face the consequences of spending on impulse. Doing this requires responsible spending and discipline, which is a very small price to pay in exchange for a stable future.

Planning and organizing a wedding budget can greatly reduce the stress of putting together a wedding. The very thought of a wedding conjures up images of finery and elegance, music and dance, fun, frolic and lavish spreads. However, all the extravagance can really add up. So, whatever the size and style of the wedding, one cannot underestimate the importance of a wedding budget.

Getting started on the wedding budget

You need to determine who is paying for the wedding. Traditionally, the bride's parents sponsored the entire wedding. This no longer holds true. So put your heads together and decide who is paying for what.

What is the total wedding budget?

Once you know who is paying for what, you also need to calculate the total wedding budget. Calculate all the income that you intend to spend on the wedding. You need to include the groom's contribution, the bride's contribution and contributions from both sets of parents if any.

Also, sometimes family and friends may choose to sponsor a part of the wedding like the honeymoon or the decoration or the cake. Ensure that you ask the persons sponsoring, how much they want to spend and stay within their budget. If you want to go a little over the budget they have allocated, you must bear the cost.

Set priorities

Before you start allocating the resources to different items, you need to set priorities. Is it important for you to invite everyone you know or is it more important for you to have a grand wedding? If you absolutely have to invite the 200 odd people you know, then you may need to choose a cheaper venue and think of having a cocktail reception instead of a dinner or luncheon reception. If you have your heart set on a lavish wedding, then cut back on the number of guests to stay within budget.

Maintain a notebook

Don't even think of having a wedding budget and sticking to it without putting it all on paper. Weddings have a tendency to get out of hand real quick. Write down your wedding budget, the breakup of the wedding budget and how you intend to spend it and the actual expenditure in a single notebook. Maintaining a wedding budget book will help you track all the expenditure easily. In case you start to overshoot, you can immediately takes steps to amend it.

You can even maintain a wedding budget online. There are many wedding websites that enable you to maintain a wedding budget online. It is a simple, efficient and effective solution to your problems.

Ask family and friends for help

If you have a small wedding budget ask family and friends for cash gifts instead of the regular chinaware. It will make things easier for them as well as you.

Planning a wedding is an effort in itself and staying within the wedding budget is positively an art, but with a little know-how you can do it and you'll be glad you did!

Copyright Andrea Britt, 2005. All rights reserved.

Reprint Rights: Feel free to use this article on your website or online publication. Please remember that you must include the author's copyright, resource box and live URL links, exactly as shown below, to the author's website at the end of the article.

Credit and debit cards can lure you into spending frenzy that can spiral out of control before you know it. Have you ever come to the end of the month and asked, "Where did all the money go?" The convenience of plastic has made it far too easy to make purchases that we might not make if we had to dip into our wallet and make a cash purchase.

Studies have shown that spending increases as the means to pay for an item becomes easier. In other words credit cards have made buying transactions easier, so we're more likely to buy stuff without concern, until the bill comes at the end of the month! Likewise, new 'pay with a wave' credit cards will make it easier still and foster even more poor spending habits.

I'm a big believer in the notion that cash is king when it comes to paying for items. If you don't have the cash, you can't afford the item and shouldn't buy it. Traditional means of budgeting to help curb spending is the Cash Envelope system. But there are clearly some disadvantages of that. There's also a 21st century version of the Cash Envelope system called Virtual Envelopes. We'll explore how you can implement a Virtual Envelope system using your budgeting worksheets.

Traditional Approach: Cash Envelopes for all your Spend Categories

One past useful money budgeting technique was to set up your saving and bill paying system using cash envelopes. Basically the cash envelope system consists of keeping separate envelopes for your spending categories and populating them with cash from your income source. Then when a bill comes due or you need to go shopping for food or an item you need, you simply pay for it with cash from the appropriate envelope.

The big advantage of cash envelopes is that, if you budget properly, you will always have the cash to pay a bill when it comes due. No more worrying about where the money will come from, be it for mortgage or rent, utilities, car payments, repairs, taxes, discretionary spending, etc.

However, there are many disadvantages of this old technique in keeping all that cash around. It's cumbersome and simply not safe as you can easily accumulate hundreds or thousands of dollars in your cash envelopes. Just imagine the heartbreak and financial setback should something happen to all that cash.

Alternative Approach: Use Virtual Envelopes for most of your Spend Categories

In today's electronic world, there's a version of the envelope system that can take the old proven approach and revamp it for the 21st century: Virtual Envelopes. Built on the solid foundation of the Cash Envelope system, Virtual Envelopes works seamlessly with your existing cash envelopes and your budgeting worksheets. The only difference from Cash Envelopes is that for some budget categories you will now deposit the cash into your bank or credit union and manage those categories online, or "virtually." Hence, the term Virtual Envelopes.

When you deposit money from your income source, you simply allocate the appropriate dollar amounts to the budget category accounts, based on your spending plan or budgeting worksheet. It's easy to move money around your various spending categories or budget category accounts whenever you need to. When a bill comes due, you simply transfer money from the budget category account to your checking and then electronically pay the bill. It's easy and extremely fast once you set it up through your banking institution.

Virtual Envelope Advantage #1: It's Easy to Get Started

To get started, ask your bank if they can set up your Virtual Envelope budget categories as sub-accounts underneath your savings account. There should be no charge for doing this. If your bank will not provide this service for free, check around for other financial institutions in your area, including your local credit union. I've done virtual enveloping for about 30 years through a couple different credit unions. I've also had a couple colleagues using this approach. So don't take "sorry, we can't do that" as an answer from your existing financial institution.

Additionally, set up your savings, checking and the sub-savings accounts to have internet-access via your home computer, free of charge. This will allow you the convenience of budgeting and bill paying from the comfort of your home. If you are uncomfortable using internet-access for banking purposes, there are just a couple things to be aware of and you will be fine. First, only use a reputable bank or credit union. They have the best security in place for all of your data access requirements. Follow their password guidelines and change your password regularly. In my book, I dedicate an entire chapter to Virtual Envelopes and how to set up your sub-accounts.

Virtual Envelope Advantage #2: Works Hand-in-Hand with your Cash Envelopes and Budgeting Worksheets

Has the cash envelope system gone the way of the dinosaur? No! I still recommend it for all of their budgeting categories for children and for the cash spending categories for adults, such as food and walking around money.

Virtual Envelopes can co-exist with Cash Envelopes just fine. Use the Virtual Envelopes for those monthly expenses that you would normally write a check or electronic payment. Examples would be mortgage/rent, taxes, car repairs, utilities, savings, debt pay-down, etc.

Our budgeting worksheets incorporate the strategy of using Virtual Envelopes and help you set up your accounts accordingly. We define auto-pay, e-check, and other banking terms that will guide you to set up your Virtual Envelopes effectively in managing your monthly budget.

Virtual Envelope Advantage #3: Safety, Convenience and Flexibility

The biggest advantage of Virtual Envelopes is that your money is safe in a banking institution instead of cash in envelopes in your house. Just imagine if you had a robbery, fire, or just plain old forgot where you put that cash envelope with your rent payment. Not a fun time trying to recover that!

With Virtual Envelopes your money is not only safe but you can access your accounts any time from the convenience of your computer at home. You will be able to see the account and sub-account balances for each of the budget categories. You will also be able to move money from one budget category to another when necessary and also move money into your checking account when it's time to pay bills.

What could be better? Virtual Envelopes are based on the proven fundamental budgeting technique of Cash Envelopes, but thanks to modern technology can now provide the ultimate safe, convenient, and flexible solution for your monthly money management.

Your Next Step

Any time of the year is a great time to take inventory of your current financial position. Check out Virtual Envelope resources including our Personal Finance book and corresponding Budgeting Worksheets and put Virtual Envelopes to work for you. At our blog, you'll find a whole host of articles that will help you get started. If you need one-on-one coaching, we can help you with that too with our personalized Budgeting Coach. It will be well worth the investment of your time.

Budgeting has a bad reputation with many people. They envision a budget means calculating hundreds of difficult sums and spending hours each week tracking every single cent they spend, all the while being forced to stay at home and never have any fun. The truth is nothing like this at all. Below are five common budgeting myths, and the reality of the situation.

1) Setting a budget is hard.

Many people feel that the process of setting a budget is hard, requiring hours of complex maths or large periods of time slaving away over large piles of paper or an Excel spreadsheet. The truth is there are many ways to go about setting a budget. If you are someone who likes a lot of detail or working with numbers, there are budgeting methods that can involve lots of figures and time working them out. But there are equally other budgeting methods that are very simple and straight forward to set up. It's all a matter of finding a budgeting method that's right for you. If you're not comfortable with the budgeting method you've chosen, you're unlikely to stick at it.

2) It takes a lot of time and paperwork to maintain a budget.

Maintaining a budget does mean you have to keep an eye on how your spending and budget match up over time (making tweaks to your budget if necessary), but very few budgeting methods require a lot of work and time to maintain them. Usually you will have a quick look at your budget when you get paid to ensure you're on track, then get back to enjoying your money.

3) You have to be in financial trouble to use a budget.

A budget can certainly help someone who is having financial difficulties find their way out of trouble, but budgets aren't limited to such situations. Anyone can use a budget. In fact, a budget is the best way to ensure you never get into financial trouble! Better yet, a budget is the perfect way to save up for an expensive item (like a holiday or the latest electronic gadget) that you know you will want in the future.

4) Having a budget means you have to suffer.

Budgets have a bad reputation because many people envision eating cheap noodles at home in a dark room lit only by a single candle, with absolutely no luxuries or fun allowed. But just because you have a budget doesn't mean you have to suffer. Coming up with a budget is all about working out how to do the fun things you enjoy doing, while at the same time ensuring you have enough money left to pay the bills as they come in. Sure, in some cases you may find you have to cut back in some areas. But the only reason you would ever suffer after putting a budget in place is if you purposely set the budget up to make yourself suffer.

5) Budgeting means not spending any money.

Ironically, budgeting is really the exact opposite of not spending money - it's working out the best way to spend your money! Sure, if possible there should be an amount in your budget set aside for savings. But even savings are simply putting aside money to spend in the future. All budgeting does is help you save money on little things you don't really need now so you can spend the money on big items that you really want in the future.

Now that you know the truth behind these five budgeting myths, what are you waiting for? Get started today in setting up your own budget, and reap the rewards they bring!

Planning a major event, vacation or making a major purchase takes a lot of planning. And so does creating a new product or service or starting a major project. And the first thing people do for each of these tasks is create a budget, right? So why is it that when it's time to start a business you don't create a budget??

Budgeting and accounting are necessary evils. No matter what - they have to be done. And no one wants to do it. People dread it as if it is the black plague. But you must perform these tasks regularly in order to manage you business finances.

So I am going to share with you three simple steps to create and maintain a budget. These steps can be done by anyone for any one of the major activities I mentioned above. And I am giving them to you because I don't want you to have ANY excuse as to why you didn't create a budget.

So here goes...

1. Determine your monthly income. Most business owners, well people in general, budget for expenses. No one ever thinks about the revenue. In order to have a complete budget you have to factor in the revenues and the expenses. Think about it - if you only budget for the expenses you are already at a loss. Never thought about it that way before have you? So figure out how much income you want to earn per month and then multiply it by twelve to determine the total for the year. I also suggest adding 5% - 10% cushion to cover unexpected expenses that may not be accounted for.

2. List ALL of your monthly expenses. There are so many costs built into a budget. And often times people budget for the big items but not the little incidentals. And it is those little items that can cause you to blow your budget. So don't forget about the little expenses, such as office supplies, internet fees, and even parking. List them ALL by month and then multiply those figures by twelve to determine your total spend for the year. Now if you notice that this fee is close to or higher than your revenues then you need to do one of two things:

a. Revisit step one and update your revenue or

b. Go through your expenses and make sure all of the costs are reasonable. You may need to push some items to succeeding years or find new vendors with lower costs..

3. Track it. Whether you maintain this budget within your accounting package or in an excel model, it doesn't matter just track it somewhere. Don't create a budget and then try to manage it in your head. It won't work. You can't remember it all. Input your actual figures monthly or weekly, depending on the project, and compare your actual figures against your budget. This will help you monitor your spending and better manage your cash flow. It's a simple process that can take as little as five minutes. This process will help you keep a handle on not just the items budgeted but also those incidental items that you didn't budget for. Again, these expenses are what can blow your entire plan and if you don't know they are there you can't take a recourse action.

Learning how to make a budget can be one of the most important financial decisions anyone ever makes. It can be the one thing that saves many people from financial ruin simply because it allows them to take back control of their money. The goal of any budget is to ensure that you and your family have the necessary money to cover life's necessities. Once those are covered any left over money can be used for any number of things, including fun and entertainment. The other thing to remember is that a monthly budget is like a living thing, with changing income, expenses and other things affecting it each month.

A budget is nothing more than some simple accounting that even kids can do. The ultimate goal of any budget is to have more money coming in then is getting paid out in bills each month. This is just common sense, but unfortunately many people have a real hard time making this happen because they have no idea where their money is going. The pay check gets deposited and before they know it all the money is gone until next pay day.

The best way to get started making a budget is to simply write down all your pertinent financial information on a piece of paper. There are free budget sheets that can be found on the internet that are useful in helping you get a good start on the budgeting process. You can also use a spreadsheet or budget software, but it is easiest to just start by writing it down with pencil and paper.

Determining your income is the first step in how to make your budget. If your job is your only source of income, look at your paycheck. Your income is the actual amount of the check, not the biggest number shown on the check. The biggest amount on the check is your gross income, which means no taxes have been deducted yet. Your net income, which you will use in making your budget, is the gross income minus all taxes and other payroll deductions. If you have other income sources such as a second job, child support, or alimony, these count as income too. Add all these income sources together.

The next step in how to make your budget is determining your expenses. This is harder than it sounds. The amount surprises many people. Make a list of every bill and expense you pay on a regular basis. These expenses include rent, mortgage, utilities, car insurance, home insurance, groceries, gasoline, parking fees, and even pet expenses. Use your checkbook register to help you remember the bills you pay. Some of these expenses change monthly, such as utility bills and credit card payments. Use an average or best guess for these. Add all these expenses together.

Once you have your income and expenses added up all you have to do is compare the two amounts. Your budget is balanced if the income column is greater than the expense column. If the expenses are greater than the income then you can use your written budget to start eliminating and cutting expenses to try and balance you incoming and outgoing cash flows.

Once you know how to make a budget it is important to do it every month. In fact it may take two to three months before your budgeting skills really begin to click. Just be patient with the process because in the end it will help improve your overall financial situation.

We all know how important budgeting is in the corporate setting. This is especially true today, now that virtually all companies all over the world are going through this massive economic breakdown affecting all aspects of our daily lives. This is precisely why today's corporations give due credit to the aspect of budgeting, which leads us to another extremely important aspect to discuss. To ensure the efficient carrying out of budgeting, then there must be a measurement system put into place, to gauge just how efficient the activity of budgeting is. Simply put, there should be quantifiable measures implemented to check just how efficient the budgeting efforts of the company have been. And these quantifiable measures would be in the form of none other than budgeting indicators.

By definition, budgeting is carried out through the estimation of values for the several financial parameters that corporations take on. These parameters are very much needed because they are related to all sorts of financial requirements that the organization itself would take on in the future. Budgeting would start with the estimation of 'sales', and then would move on to 'recruitment needs' the same needs that the company would have to take on in order to accomplish 'sales' and then from there, the estimation of 'appropriate fund sources' as well as the organization of efforts towards 'repayment of debts' would then be carried out. This is, more or less, the usual flow companies take on when budgeting and allocating their different monetary resources.

As with any balanced scorecard containing indicators and quantifiable measures, there are also perspectives to consider when developing your own set of budgeting measures. These perspectives are as follow: Management, Structural, Continuous Improvement and Learning, as well as Conformance.

The Management perspective, of course, caters to all managerial aspects of the organization. The following are the commonly used indicators for this perspective: success ratio, percentage increase in forecasting accuracy, and the number of methods and sources used in financial forecasting and budgeting.

The Conformance perspective, on the other hand, tackles just how far the organization goes when it comes to conforming to required norms. Indicators that can be used here include percentage of employees who are agreeable with the estimations released, objective fulfillment ratio, debt coverage index, and the degree of equity-debut alignment.

Structural perspective is all about the structure taken on by the budgeting efforts of the company. The indicators used here include the frequency of budget preparation, the percentage of data in an area for which the budget is being prepared, as well as the cross-checking methods used.

The last perspective, which is continuous improvement and learning, contains indicators that tackle the efforts of a company's budgeting endeavors towards constant improvement and progress. The indicators here include cost decline fraction, usefulness ratio, the percentage decrease in terns of time for the budget estimations, as well as the percentage drop in deviation. All of these indicators are geared towards using effective practices deemed from past experiences during the regular budget preparations taken on by the organization.

What you can accomplish as an IT manager is closely tied to how much money the company is willing to entrust you with. The more money that they are willing to give you, the more you'll be able to get done. The way that you'll get your hands on the company's money is to create a budget and then manage it. Let's talk about what you'll need to know in order to do this correctly.

Planning

IT managers get to show leadership by starting their budget creation process by thinking about what their team is going to be asked to accomplish during the upcoming year. This is done by selecting the goals that you want your team to achieve. In most cases these goals will relate to the overall goals of the IT department or the ones that your company's senior management have set for the firm.

Your next step will be to evaluate how you can achieve these goals. There is always more than one way to make this happen. At the same time you are going to want to take a close look at each option and use your best judgment to determine what you think the most likely outcome would be.

Once you've identified your options and their probable outcomes, now comes time for you to make a decision. Using the costs and benefits of each option, pick the one that you believe will have the best chance of leading your team towards accomplishing their goals.

Coordinating and Communicating

Most IT leaders will have multiple goals that they will want their teams to accomplish each year. This means that the budgets that they are creating will have multiple parts to them.

It's the job of the IT manager to communicate to the different parts of the team that may be helping to create the pieces of the budget just exactly what the team's strategic plan is. The goal is to have this knowledge used when creating each component of the budget.

Once each part of the budget has been created, they will need to be brought together into a master budget for your team. This is where the IT manager needs to balance and combine the different parts in order to create a master budget that reflects what he or she wants the team to accomplish during the upcoming year.

Monitoring Progress

Once your budget proposal has been approved and your team has been given the money (or at least part of) that you had requested, now you have to monitor how it's being spent. The easiest way to do this is to compare the team's actual results to the budget.

If it turns out that something is out of whack, then this is when you need to step in and take some form of corrective action. The official term for out-of-whack is called "variance". This occurs when there is a difference between the actual results and the results expected in your budget. A variance can be both favorable (when results are better than was expected) or unfavorable (when results are worse than expected).

Evaluating Performance

At the end of the day, as an IT manager you need to expect to have your performance evaluated at least in part by your budgeting skills. Where you able to accurately predict how much funding your team would need in order to accomplish their goals? Once given the funding, were you able to monitor it and make sure that you only spent what you had and produced the results that you had predicted?

Your overall success will be determined by comparing the actual results that your team achieved to the budget that you created at the beginning of the year. In most companies, this will play a key role in determining your performance evaluation for the year.

What All Of This Means For You

In order to be a successful IT manager you are going to have to prove to the company that you can use its money to successfully meet goals. In order to do this you're going to need some money and that means that you're going to need to have a budget.

Budgets don't just magically show up: you need to sit down and plan what your team's financial needs are going to be. Budgets are generally made up of multiple parts and so you're going to have collect all of the available information and create a single master budget from it. After the company gives you your money, you'll need to use your budget in order to monitor the progress of your IT dream team. Finally, at the end of the year you need to realize that your performance as an IT leader will in part be evaluated by how well you used your budget to meet your goals.

As much as we'd like to think that our technical knowledge is what will propel our IT careers forward, it turns out that it is really our business skills that will determine how far we'll go. Knowing how to create and manage an IT budget is a key skill that you'll need to have.

When creating a budget it is very important to remember that simplicity is the key to a successful budget. You don't want to make it too difficult otherwise you will lose the motivation to stay on your budget.

We have come up with 6 easy ways to create a budget that you can be successful with and will want to stick too.

1. Define your goals

Firstly you want to create goals for yourself. Whether you just want to be debt free or just gain better
control of your finances, it is important to have goals established when creating your new budget.

2. Gather information

In simple terms, a budget is nothing more than a plan. It is a plan of how you want to spend your money. So in creating a plan you should have as much information as possible to make sure that your plan is as complete and precise as humanly possible.

3. Get the proper tools

You are also going to need some essential tools when creating your budget. These are tools that just about everyone already has.

1. Calculator

2. Notebook or check register

3. Pens and Pencils

4. Bill Organizer

5. Calendar

6. Budgeting Software (Optional)

4. Develop your plan

So far you have done all of the prep work to get started creating your budget. Now is the meaty part of
creating your budget. You are now ready to create your plan. You will want to keep your goals in mind and create smaller goals that are easily accomplished. What this does is keep you motivated to reach the bigger more important goals. You should develop a step by step method of reaching your ultimate goal.

5. Implementing Your Plan

Now that you have created your plan, it is time to start using your plan. During your day to day
activities you will want to stay as close to your budget as possible. If you have set a daily spending
amount in your budget you want to make sure not to exceed that figure.

6. Adjusting and Analyzing Your Plan

Life changes at the speed of light and so should your budget. There are expenses that you might have
forgotten about, or maybe an expense shows up that was unexpected. Whatever it is, you have to be able to adjust your budget accordingly. It is a good idea to analyze and adjust your budget periodically. Most people do this at least once per month.

So now you have 6 solid tips to create a budget that will work for you. The only thing left to do is to get started. This is the step where most people drop the ball. Once you get over this step you will undoubtedly experience the success you want and need financially.

The first stage is to ensure the organisational chart clearly represents the management responsibility of each department and activity area. Financial accountancy and cost accounting should be integrated and aligned to enable detailed management information reporting and accurate financial records for each activity.

The cost and management information reporting system should be focused upon critical items where management action influences the financial result. Before setting the revenue budget the managing director, advised by the financial director or management accountant, should identify all crucial elements of the business that may have an impact on future financial performance.

Having established the departmental responsibility for producing the budget and the critical items that will be monitored the accountant should prepare budget templates and hold pre-budget meetings with the departmental heads. At these series of meetings the department heads will receive the budget templates and discuss the detail required and the timetable for submission.

Management responsibility for producing the departmental budget is crucial to achieving the financial targets and can be greatly enhanced by relating bonus payments to the level of achievement.

The work of the management accountant is to receive all the departmental budgets and put them together in a final budget for approval by the directors. Throughout the budget approval process adjustments are likely to be required to reach the overall financial objectives but once finalised each budget should be signed off by the department head responsible.

Simply taking the previous years numbers and adding a percentage is a simple solution to preparing the next year budget but is likely to be of poor quality. Quality comes from department heads and managers generally taking responsibility for their own areas of activity and agreement to the detailed financial parameters.

The sales budget critical areas are the list of individual products, additions and deletions from the existing product range, the volume of sales by product and the selling price including any proposed changes. In addition all sales channels, advertising plans, promotion and marketing campaigns should be evaluated to support the sales plan.

Sales administration costs including representatives, sales office and overheads of the sales function need to be evaluated and related directly to achieving sales budget. The higher variability included in the sales department costs can be a distinct advantage. For example, relating the numbers to be employed directly to the sales volume to be achieved, staff bonuses payable on achieving the objectives.

The production budget should start not from the numbers of people employed in the past but be set according to the numbers required to produce the budgeted production volume of the future.

The budget approval process is an ideal opportunity to consider in detail the business overheads, staff numbers and qualities required to drive the business forward. Fixed costs may be incorporated into some areas to ensure the administrative costs are controlled.

For example, a works canteen may have a fixed cost to be paid by the business each month. It would then be the responsibility of the canteen manager to provide the employees with the service required while budgeting to set the price of those services at a level which ensured the contribution from the company created a break even position each accounting period.

Too many businesses set budgets for the future based upon historical costs and sales volumes which are divorced from management responsibility. By budgeting with individual management responsibility for achieving the financial targets the overall performance of the business can be better managed and controlled to achieve the desired financial performance.

A prime responsibility of the management accountant is to evaluate the critical areas in cost accounting, ensure those areas are aligned to management responsibility and present the revenue budget compared to the financial accounts to enable the organisation to achieve and extend its financial performance.

Budgeting. It's a word we're all familiar with. Everyone knows what a budget is, right? Yet how many of us actually make and stick to a solid monthly budget? The truth is that most of us start out with the best of intentions, but an unexpected expense comes up and busts our budget. Then we give up and go back to juggling our finances and worrying about having too much month left at the end of the money. However, if you are striving to create a budget for the purpose of systematically paying off your debts, or to start a savings and investment program, then it's critical to develop a workable and realistic budget.

So what's the problem? Why do most of us fail at the simple task of creating a budget so we can live within our means? The simple truth is that most budgets don't work because they fail to account for irregular or variable expenses. Everyone knows how much their rent or mortgage payment is. It's the same amount month after month. If your rent is $1,000 per month, that's a "no-brainer." The same is true of many other fixed expenses, such as auto loan payments, cable TV subscriptions, insurance premiums, and so on. It's easy to budget for these expenses because the amounts don't change from one month to the next.

Besides expenses that are the exact same figure each month, there are numerous types of expenses that vary a little from one month to the next, yet we still have a pretty good idea what we spend each month. A good example is our grocery bill. Most of us have a fairly clear picture of how much we spend each week at the supermarket. So we can insert a realistic figure into our budget-in-progress and not be too far off the mark. Sure, the amounts may go up or down slightly each month, but we usually know the range we're dealing with. Other examples of this category include telephone bills, utility bills, and gasoline (although this one certainly seems to be going nowhere but up these days!).

The real culprit in busted budgets, however, is the variable or irregular expense. How much will you spend on car repairs over the next 12 months? What about medical bills? Home maintenance costs? It seems that bills for these types of expenses hit us out of left field, and there goes our budget. Before long, we're using food money to cover a new set of tires for our car, and the whole budget comes crashing down.

So what's the solution? There is no perfect answer to this problem. But we can come to a close approximation by using the simple technique of monthly averaging. Start by gathering 12 months' worth of checkbook registers, bank statements, and credit card statements. Write down (or enter into a spreadsheet) how much you spent each and every time your money went toward something that was not a fixed expense. Group these expenditures into categories, such as auto, home maintenance, clothes, etc. Don't try to break it down too far. What you want is a handful of useful categories. Then keep listing each of these expenses under their relevant categories for the full 12-month period.

When you are done with this exercise, you should have an excellent idea of your total annual expenditure for these variable expenses. For example, if you add up all the automobile repair or maintenance expenses for the year, and the figure comes to $1,200, then divide by 12 to get the result of $100 per month average. That's how much you need to allow in your monthly budget in order to build up enough reserves to handle an auto repair when it comes up. Again, this method isn't perfect, because an expense may come up that exceeds your estimated outlay, but at least it takes into account a closer approximation to reality than simply guessing, or worse, ignoring auto maintenance in your budgeting.

The trick here is to set up a separate savings account in which to set aside these "extra" funds. Let's say the "extra" $100 goes into the savings account for six months, and then you get hit with an auto repair for $400. You pull the money from your $600 savings that was purposely built up for this type of expense. This way, you're automatically setting aside amounts intended to cover each type of irregular expense that you encountered over the previous year.

Most people are shocked when they perform this 12-month analysis of irregular expenses, and it immediately becomes clear why their budget is always breaking down. This technique leads to the discipline necessary to recognize that "extra" money is seldom really extra. If we think we have our bills covered, and there is some cash burning a hole in our pocket, our tendency is to spend it on something fun. But if we know that there really is no cash left over, because we haven't yet set aside the extra $100 needed to keep our car on the road, then we'll be less inclined to spend it on pizza, beer, and movies.

Budgeting can be successfully accomplished by this technique of monthly averaging, especially if we consistently apply it year after year. As we move forward, our understanding of our true expenses becomes clearer and clearer, and we are no longer surprised by the occasional unexpected expense. The best way to implement this approach is to set up a regular savings program, where the amount you're setting aside to cover irregular expenses gets automatically deducted from your paycheck and forwarded to your savings account. If the money is deducted from your paycheck before you even see it, then you will be less tempted to skip this critical part of the budgeting process, and you will greatly increase the chances of making a budget work over the long term.