Budgeting

Budgets should be managed no differently on IT projects than on any other project. The reason that budget management is so challenging for project managers on these projects is that, typically the project manager of the project is not accountable for the budget and frequently does not even have insight into how that budget is assigned or tracked. Money is typically assigned from operational budgets to perform the project and responsibility for the money and tracking of expenditures is done at the operational level. The result of this disconnect between financial oversight and the project manager is that budgeting for project activities and measuring the project's performance to budget are not done in any formal way, and frequently are not done at all.

This does not excuse the managers of IT projects from taking responsibility for the budget and utilizing all the best practices established for cost management set forth in the PMI's PMBOK, it simply makes their job more difficult. Here are a few tips on how to overcome some of the challenges typically faced on IT projects.

Budget Accountability and Responsibility

The project sponsor is the person who is accountable for the results of the project. Before I go any further, let me take some of the mystery out of the terms: responsibility and accountability. The difference between accountability and responsibility is simply the degree of suffering the owner will have if things go wrong. The person who is accountable is answerable for the results, or even liable for the results. Liability has a legal context so the person who bears the legal liability for the results of a project would have to be an officer of the company. Responsibility has a broader context and does not entail being liable, but means answerable for the results. Getting back to the project, an officer of the company may be the one who is accountable for the project budget. Often the project is not large enough or expensive enough to warrant oversight by an officer of the company in which case the accountability for the project will be handed down to someone in a management position whose level of authority would allow them to have oversight over the project.

The project sponsor delegates the responsibility for the budget to you, the project manager. In the world of IT the relationship can be more complex. Frequently projects in this area have 2 sponsors: the business sponsor and the IT sponsor. Their relationship is one of customer and vendor. The business sponsor is accountable for the money spent on the project and the IT sponsor is responsible to the business sponsor in the same way they would be if the business sponsor were to represent a company entirely external to the IT organization. The business sponsor still bears the overall responsibility for the project and they delegate that responsibility to the IT sponsor in the same way they would if they were to hire an external organization to perform the work.

The sponsor (either business or IT), delegates the responsibility for the project to the project manager. The delegation won't be documented but it takes place as soon as you accept the task of managing the project. They place their faith in the project manager's ability to deliver the business value for the project using just the amount of money budgeted for the project. They do this through the IT sponsor in the case where one is identified. In either case, you are not the one that will feel the wrath of the corporation should the project overspend, or fail to deliver on the business value, the business sponsor is. You may feel the pain indirectly. You might not get that bonus, or you might even be fired, but no-one is likely to pursue you for the amount the project is over budget. You owe a duty of care to the sponsor which includes ensuring that the project delivers its promised benefits for the budget agreed upon, or to alert them as early as possible to problems that would prevent that from happening.

Planning the Budget

There are two types of approach to budget estimation: top down or bottom up. In practice, the right approach is often a blend of these 2. Top down is chosen when there is a strict budgeted amount allotted for the project. Bottom up is chosen when the project is essential to the business, or is mandated by legislation. The first step the project manager should take is to inform themselves of any budget limits, either a specific amount, or a range. Keep in mind that being provided with a range for a budget does not necessarily mean that bringing the project in for the upper end of the range is acceptable.

Your business sponsor, or IT sponsor should be able to provide you with the budget amount or range for the project, where one exists. Your first sit down meeting with the sponsor should include an exchange of this information. Your approach to planning the project will depend on whether you are given a hard cap to work with, a range, or no cap at all. Let's tackle the case where you're given a hard cap first.

Hard Cap: A hard cap requires that you scope the project to fall under the cap. In many IT projects a good deal of the budget must be spent on labour so knowing the cost of labour is vital to this exercise. Your accounting group should be able to supply you with the loaded labour rate used by your company to cost labour. Knowing the loaded labour rate and the number of work hours required for the task or deliverable under consideration allows you to estimate the cost. Estimates for other expenses such as hardware and software licenses should be available from your procurement group, the vendors, or the internet. Keep in mind that no-one can give you an accurate cost estimate without specifics, which you don't have at this point. You will be able to ball park an estimate for the deliverable, or task, under consideration and tell whether that estimate is likely to fit within the budget.

There are all kinds of methods for estimating the cost of software development, based on the hours of effort required to build the system. Since you don't have all the requirements at this point, forget about Function Point Analysis (FPA), or any other bottom up method. An analogous estimate from a similar project in scope and complexity makes a good benchmark. You can also use the Wide Band Delphi process which requires a panel of experts to break the work down and estimate the cost of each task. If none of these solutions are available to you, it's up to you to break the work down and estimate the costs of each activity. Don't attempt to complete the WBS, break the work down into the components you can foresee. You might want to solicit the help of a business analyst in this exercise. Your estimate will only be as reliable as the amount of information used to derive the estimate, don't forget to add this disclaimer to any estimates you provide to the sponsor.

Don't forget to include the cost of QA when estimating software development costs. There is actually no set rule of thumb to estimate QA costs. One approach is to set your QA cost estimate as a percentage of your development cost estimate. A good median to choose is 35%, or roughly 1/3 of the estimate for development. Adjust this ratio upwards where the testing is all manual and the application is a "mission critical" one. Adjust it downwards where the application is not "mission critical" or your QA group has automated testing tools.

Development environments, test environments, and a production environment must be considered when costing IT projects. You may have all of these already in place so they won't add to your costs. If not, make certain that you identify all the environments that must be provided to deliver the project. QA environments should be separate from the development environment. One of the environments must support integration testing. Other environments to consider are: the QA environment, a staging environment, and the production environment. QA environments are typically used for testing functionality, not performance or stress. If your system is "mission critical", you should consider a platform for performance and stress testing.

Delivering a project's goals and objectives within a budget cap will involve trial and error. The first pass likely will not yield a plan that fits within the budget, or if it does the budget may be too big or you missed something. As you whittle the budget down and approach the cap, you must ask yourself if the project is still capable of delivering the stated goals and objectives despite the reduction in scope. Risks are something else to be considered. Unless you took a wild guess at the right approach at the outset, any reduction of scope you made to reduce costs will be accompanied by an increased element of risk to the project's goals and objectives. To be feasible, a cheaper alternative must have risk responses identified to handle the new risks. Your project budget must include a budget for managing the risks to your project, so make sure you estimate the costs of the risk responses.

The process of estimating the costs of high level deliverables and activities will yield one of 2 results: either your project can fit within the established budget, or it can't. If you are unable to deliver the goals and objectives of the project within the budget cap, you will need to alert your sponsor immediately. Don't wait for the end of planning phase/beginning of implementation phase Gate Review to spring it on them.

Budget Range: Almost the same steps as you used to deal with the hard cap. Use the lower end of the range to put your estimates into context and as you approach mid range, begin to look for areas where scope can be reduced. The approach to reducing scope needs to include the identification of risks and estimates for the risk responses. A budget range provides you with more options when scoping the project. When you have thrown out the "Cadillac" solution because you assumed it would exceed the project budget, you may want to revisit that decision if your estimate is close to the lower bound.

Your budgeting exercise is almost certain to require the same type of reconciliation required for the hard cap so approach it in the same way. Compare the requirement or feature or function under consideration to the project goals and objectives. Does it directly support a goal or objective? Is there a cheaper, more cost effective way to deliver the same functionality? Don't forget to include an estimate for risk responses in the total budget.

No Cap: No budget cap makes the chore of budgeting for the project much simpler. Beware the project with no budget cap however, as organizations can rarely operate this way. If you are not given a budget cap it may be because you are expected to tell your sponsor how much the project is likely to cost and then let them make the decision on whether to proceed or not. If the project is in response to legislation, or there are other compelling reasons for performing the project, you will probably still have some guidelines to follow which will limit your spending. Do your best to have your sponsor state any expectations they have at all about the ultimate cost of the project.

The project scope or schedule will be the top priorities where there is no budget cap for the project. Planning spending for this project will require you to reconcile budget and scope/schedule in a different fashion than for projects with a hard spending limit. The system features and functionality should be more clearly defined in the case where scope is the top priority. They should also be more clearly defined where time to market is the top priority. The difference between these two scenarios is that in the case where features and functionality are the priority, delivering the full set will require the project to take however long it takes to build these. The feature set may have to be pared down where time to market is the driver.

You should have a Rough Order of Magnitude (ROM) estimate of the cost of the project at this point. This estimate should either fit under the stated cap, or within the range you were given for the project. The next step is to continue the breakdown of the work and assign a portion of the budget to each deliverable or task in the WBS. We'll talk about that in the next article in the series.

With the rising cost of everyday items today creating a family budget plan is becoming more and more important to keep track of where your family's money is going. Making your money work for you is the ultimate goal of any budget, but you need to be patient if you have never made a budget before.

Most financial problems, both personal and family, are a result of poor budgeting skills or the failure to follow the budget that is made. This is true of people in all income ranges. If you want financial freedom you need to be bale to track your assets and liabilities and your income and expenses.

The fact is that people of all income levels have the same struggles with money. People who earn thousands of dollars per pay check can have the same financial problems as those who earn just a thousand dollars per pay check. The problem isn't the amount of money one makes at their job; it's their behavior with their money once they get that paycheck. And the financial behavior of the majority of people is very poor.

A family budget plan is nothing more than a cash flow plan. A plan for your money. We make plans for everything else, from where we are going on vacation to blueprints for houses, but we seldom make a plan for our money. And if there is no plan then your money does not know what it is supposed to do other then get spent on stuff.

A good budget, once you get the hang of it which can take around three months, should take all of your family income and outgoing expenses into consideration. There should be a balance between the income and expense side of the equation. If not then it is time to start finding areas to cut back on. As you work your budget over time it should free up enough money that you can start making allowances for savings and retirement accounts.

The first step of any family budget plan is writing down on a piece of paper your total monthly income and your total monthly expenses. When writing down your expenses be sure to include everything from your biggest payment to the smallest expense. Subtract the expenses from the income and see if anything is left over. If not then you can start looking at the expense column and start cutting out unnecessary items that are costing money that could be better put to use else where.

If you have money left over you need to seriously consider where this money needs to go. If you have debts such as credit cards or car payments it is wise to put some or all of this money towards paying them down. If you have no extra debts start saving and investing. Before long you'll have a nice little nest egg built that will secure your family's future.

If you are having trouble keeping within your family budget plan here are four quick tips that can help you meet your goals.

1. Keep a log book or ledger where you can list you income and expenses on a daily or weekly basis. One of the hardest things for most people is keeping track of their daily money habits.

2. When buying groceries make a list before you go and buy all your groceries at one time. Make sure to stick to your list and do not buy things that are not on it.

3. Don't go to the store if you do not need to buy necessary items. Impulse buying is a budgets worst enemy.

4. If you are tempted to buy something think about it before you make that purchase. For large items over $300 or so take a day to think it over. Chances are you don't really need whatever it is.

For many people creating a family budget is an exercise in frustration. Where to start, how to set it up, should I use budgeting software? Are all questions that nearly everyone asks? And then when they do get it set up and start tracking the money coming in and the money going out something happens. An emergency or an impulse buy that screws the whole thing up.

Unfortunately the majority of people give up on their family budget before they ever give it a chance to do what it is supposed to do. One thing everyone needs to understand is that a budget is not a rigid thing. It is flexible and needs to allow for those unintended purchases or emergencies that life is full of. And if you stick with it before long it will be a cash flow planning device you cannot live without.

That's all a budget really is, a cash flow plan for your money. That's right, your money, which should be working for you, not the other way around. A budget allows you to track your income and expenses, giving each dollar a task each and every month. This gives you a good picture for paying bills, setting aside savings, and planning for the future.

If you are having trouble creating a family budget here are 7 tips you can use to make the process easier. Get a piece of paper and list out income on one side and expenses on the other.

1. Calculate your monthly income by gathering three months worth of pay stubs and averaging the monthly earnings.

2. Figure out your monthly bills by averaging the last three months worth. Do this for expenses such as rent, mortgage, utilities, phone bills, car payments or other fixed monthly expenses. You can also do this for those monthly expenses that move up and down from month to month such as credit card bills and groceries.

3. Subtract your monthly expenses from you income and see if you have any money left over. You will start to see areas where you might be spending too much money and can cut back on. This can free up money for other purposes.

4. Now that you have everything listed out in front of you you can start assigning certain amounts of money to certain expenses. As you make those payment note them in your budget to see if you are staying on track.

5. As you find ways to cut expenses you can also start designating a certain amount of money that goes into savings or retirement accounts every month.

6. Your first budget may not work out quite right. It takes most people around three months to start getting their budget working. Be patient and keep working at it, before long it will become second nature and you will have control over your money.

7. Once you have a good grasp on your hand written budget look into getting personal budgeting software such as Quicken or Microsoft Money. This will make your budget much easier to work with and they offer additional feature that can help you plan your financial future.

These are the basic steps for creating a family budget that will get you started and on your way to taking back control of you financial life. If you stick with it before long you will start to realize how much money you used to waste and how much better it feels to know where your money is going and how it is working for you.

Budgeting isn't that big a deal. Too many people look at budgeting as this large sign saying "I have money trouble."

But it is far from that. Budgeting is responsible financial management. Every successful business budgets. Even the government budgets. It is necessary if you want to meet your financial goals. You may be thinking that no one you know budgets right now, but eventually they will need to. After all, you don't want to be working well into your retirement years just because all of your friends are.

Budgeting keeps you ahead of your bills. It helps you pay off your debt and save for the things that really matter to you. Stop thinking of it as a way to limit your spending or hold you back. It isn't a financial diet. It is a financial road map.

Think of it as three main parts: summarizing how you spend, controlling what you spend and planning for your future.

When you first start budgeting, the first step is to track your spending for a short amount of time to see where it is going. Set up income and expense categories to fit your spending. Using someone else's categories or budget template almost never works. We all have different expenses. It helps to keep all of your receipts for two months. Use these to create your categories and see where you are spending your money.

Make your categories detailed enough to tell you where things are going, but don't go too far and get too detailed. This will just slow you down and make you want to give up.

Once you know what you are spending and where, you can establish some spending goals for yourself. There are some places you can skim back and there are some that you can't. You have to be realistic. Don't set a goal of cutting back your grocery bill by $200 in the first month. Take smaller steps and set smaller challenges. Look for ways to reduce your spending and make it a challenge.

As you work on cutting your costs and reducing your spending, you can start working towards the financial future part of your budget. I like to include with my budget all the planning I do financially. Your debt reduction, your yearly expenses savings, your insurance needs -- this is all tied to your budget. Plan out what you need to do to get out of debt. Without your budget, you wouldn't be able to find the money to pay off your debt faster. Include in your budget categories for debt reduction, emergency savings and yearly payments. You will probably find that you have to choose one goal at a time to work towards. Pay off your debt first, then start your savings.

And keep in mind that a budget isn't something you write down and then try to stick with no matter what. Budgets move. They are adjustable. Just as your finances change, so will your budget. You may find that you have less income one month and need to readjust how much you can spend on groceries and entertainment for the month. Or you could have an unexpected bill come in. Don't just toss away your budget when this happens, use it to take care of the situation.

The other day I received an email from a guy who was looking for some help with his budget. What he really wanted was to run his family like a business.

While I think it's a great idea to have the mindset that your family does operate with a bottom-line (that can't or shouldn't be masked by credit cards and borrowing beyond your means), you also need to remember that creating a home budget needs to be simple - and stay simple.

This guy wanted to know if a personal budget should allow him to do accruals. Heavens no! An accrual is basically where you might pay for an expense (such as car insurance) every six months, let's say it's $300. But you know that the expense really applies to the next six months. So you would spread that $300 over the six months - recognizing the expense on a month-by-month basis.

Sound confusing? It's really not too bad. Businesses do it all the time because it gives a more realistic picture to their net income. (Imagine if a company had a big expense relating to the prior year that happened just after the new fiscal year started. It would understate that prior year's expenses.

As a family, if your home is being foreclosed on, does the lender care that your net income looks good if you don't have any cash to make the mortgage payment? Of course not. Families need to operate on a cash basis. Cash is, really, all that mattersi in the end (financially speaking of course).

Your First Step in Creating a Home Budget

Write down everything you spend for one month. This will give you a realistic idea of how much you will need to be budgeting into different categories. It's crucial that you write down every penny you spend too. I've talked a lot about the power of writing things down when you first begin the process of creating a home budget.

Some people get after me on this and say they want to begin budgeting right now. Well, you are. Recording your expenses is at least half of your budget. The other half is planning what those expenses will be.

Actual Creating Begins Here

Once you've written down your expenses for one month, you'll have a pretty good idea of where you spend money. So, write down every single fixed expense you have (these don't have to be monthly). A fixed expense would be rent, car insurance, subscriptions, property taxes, internet, phone etc. Break those all down so they are monthly fixed expenses. So if you paid your car insurance premium every six months, you'd divide the premium by six to get your monthly car insurance expense (this is kind of like the accruals we talked about above, you're just doing this to stock up cash, not recognizing the expense over the period in which it was used...).

Now that you have your fixed expenses, brainstorm all of your variable expenses. These might be electricity, gasoline, groceries, toiletries, gifts, entertainment, restaurant (you can fix this amount at zero if you're working on getting one month's expenses saved with the Primer Budget), etc.

Add both your monthly fixed and variable expenses together. That's where your money is going. You've used what you've written down to help you be realistic about what these expenses really are.

Allocating the Budget

Now, if you have a spouse, sit down with them. If you don't, sit down with yourself. Turn off the TV, radio, etc. This is time to focus. Decide on paper how much you want to spend this month in each spending category. Some categories will be easy (Rent), others will be tough (groceries). Take a look at what you wrote down and be realistic.

When you first create a home budget you're kind of stepping into the darkness a little bit. That's okay. Just don't expect to be able to predict every expense the first, second, third, or even fourth month. If you're abiding by Rule #4 of YNAB then you just roll with the punches when it comes to accidentally overspending. Resolve to do a little bit better each month.

Sticking with Your Home Budget

Stick with your budget. Don't give up. Don't throw in the towel. The budget is the most powerful tool you have to manage your money and make it do what youwant it to do, instead of the other way around. Continue recording every purchase you make. Your spending will drop from that alone. Work together as a team if you're married. Encourage each other to stay on the budget. Do not be domineering or coersive when creating your home budget together. Be honest and openly communicate your needs and wants. Be accommodating and sympathize with your spouse. Do not give up! I promise you after three months of active budgeting (1-2 hours per month) you will (seem to) have more money. Each dollar will work harder and longer. And you will finally gain some financial ground.

Developing a business budget is an exercise that all accountants undertake on an annual basis and which forms an integral part of any successful business planning.

A budget is a document that allocates financial, physical and human resource use over a specified period of time to attain certain goals.

A good budget upholds organizations' long-term goals and should allocate resources to activities that will drive the company towards achievement of such goals.

The following are the best practices adopted by world class businesses while developing a budget:

1. Link budget development to corporate strategy

To best serve the company's long term goals and objectives the managers develop a budget that is in line with the company's corporate strategy.

This unites together personnel in focusing what matters most to the organization and avoids uncoordinated and scattered efforts by various departments and managers.

2. Leverage on technology while designing the budget

More companies are automating their budget management to ease the process and also involve every stakeholder as much as possible. When developing a budget it is best that every stakeholder is kept in the loop on progress during the budget implementation period on performance.

Technology eases business budgeting process and makes it possible for line managers inputs to be incorporated in the budget. Effective technology can be used to make, updating and track of budget much easier.

3. Tie employee incentives to performance measures

To ensure that the business budgeting is a success leading companies tie organization reward system to how best they meet the budget.

While managers are expected to uphold the organizational goals in some instances they can engage in counter productive activities creating risks. Tying budget to the reward system can bring a balanced conduct within the management.

4. Keep an eye of cost management in the budgeting

Managers should keep abreast current costs and probable futures costs to ensure that they provide the budget developers with accurate and relevant information.

This is very useful as it reduces time and cost of developing a budget, since information is readily available.

5. Manage effectively the budget process

To develop a quality budget at low cost the managers should streamline the process by ensuring necessary information is available for access during budgeting and avoid possible delaying circumstances. This will ensure the budget cycle is cost effective and budget developed is effective.

6. Ensure that the budget is flexible to accommodate change

A good budget should be flexible such that it can incorporate changes in the future. Ideally the future cannot be fully be determined and therefore a good budget should be one that can accommodate changes brought by uncertainties in the future.

This gives stakeholder's confidence to be in a more willing position to retain their relationship with the organization.

7. Develop allocation procedures that support organization's key strategies

Organizations that follow best practice in budgeting list down procedures on how to allocate resources. They allocate resources in a manner that supports those activities that are in line with key strategies.

These procedures and guidelines help the organization to save time in resource allocation decisions and affirm organizations commitments as planned. Success in business budgeting is easily achieved in companies that have good corporate governance structures.

Housekeeping is one of the departments in the hotel that has the most bulk expenses and consumable items. Items like bathroom amenities such as shampoo, conditioner, body lotion or moisturizer, eau de cologne, facial soap and body soap; bath towel, hand towel, face towel, bath mat, bathrobe, rubber mat; bed sheet, pillow, pillow case, throw pillow, neck pillow, mattress pad, blanket, duvet/ duvet insert, bed cover; toilet paper, facial tissue; coffee maker, coffee sachet, sugar condiments; ironing board, flat iron; alarm clock; cooking utensils, crockery's and cutlery; give away toothbrush and toothpaste; printing materials, stationery, envelope, note pad, ball pen, folder, telephone directory, Bible or Holy Qur'an can have a substantial impact in the hotel's overall expenses.

These are variable assets that when consumed, damaged, lost or become sub-standard are being discarded or removed from circulation, Once removed from circulation or consumed, the same quantities must be replenished or replaced with additional mark-up in order to maintain the high standard or quality of service in the hotel.

Fixed assets like the room's furniture and fixtures such as beds, fridges, television sets, mirrors, sofas, easy chairs, reclining chairs, tables, telephones, lamps, headboards, air-conditioning/heating equipment etc. can be very costly when damaged or become sub-standard. These items are usually included in the Capital Expenditure Budget especially when refurbishment is required. But if its only one or two pieces, this amount can be allocated in the operating budget.

For the machine and equipment, Housekeeper's cart and vacuum cleaners are the most important tool used in the overall cleaning and maintenance of the hotel guestrooms and public areas. Machines like carpet shampoo and water extraction machine, rotary machine for carpet shampoo, floor scrubber and floor polishing, wet and dry vacuum cleaner. hydraulic lift etc. are additional heavy duty machines that help in the overall cleaning requirements of the hotel. These too are included in the Capital Expenditure Budget.

For Laundry area there will be the laundry machine, washer, dryer, dry cleaning machine, laundry folding machine/ calendar, tables, carts, laundry sorter boxes, movable clothes hanger rails, guest laundry printer etc. are Capital Expenditure items, while detergent, bleach, stain remover, dry cleaning fluid, ph level water treatment solution etc. goes to the operational budget.

Listing all the detailed items involved in preparation of budget gives you an idea how intricate housekeeping budget preparation is.quote>

With the above numerous items, the consumable or fast moving items are the most important items in the preparation of budget. The consumable items are included in the operational budget. The fixed asset items are included in the Capital Expenditure Budget or CAPEX.

Operational Budget is being prepared annually and submitted to the Director of Finance for further study and to finalize the total amount in coordination with the department head. Operational Budget is always based on the next year's forecasted occupancy percentage. For example:

Item: toilet roll @ $0.50/roll
2008 consumption @ 50% occupancy = 50,000 @ $0.50 =$25,000.00
2009 forecasted occupancy percentage is 75%

75%- 50% = 25% ( 25% of 50,000 =12,500)

(50% + 25%= 75%) = ( $25,000.00 +$12,500.00 = @37,500.00)

Remaining items are calculated in the same manner till all the items required are included in the next year's budget.

Capital Expenditure Budget is for specific items or project that needs to be replaced, made and built in the improvement of guest service or the hotel itself. For example:

The hotel management with the approval of the owner of the hotel would like to extend the Laundry service to non-hotel guest or outside customer. The project will be a "Laundry Shop", therefore a quotation will be required from the contractor for the cost of building the Laundry Shop, the additional guest/customer laundry bag, laundry and dry cleaning list, and additional manpower for customer service etc. To sum up the amount of Construction of laundry shop = $35,000.00; additional laundry bags and lists = $5,000.00 and additional manpower = $9,000.00 annually.

The $35,000.00 will be included in the Capital Expenditure while the additional laundry bags/lists and manpower will be added in the operational and staffing budget.

Therefore, the operational budget is for the consumable items and Capital Expenditure is for special project or items that are costly. There are also certain items being shared by the Front Office and Housekeeping. The charges on these items are being split between the two departments. When it comes to Maintenance, Engineering Department charges the Housekeeping for any services rendered like maintenance of the machine wherein they have to supply machine parts and labor, so these are being coordinated with Engineering. It is important that housekeeping machines are handled with care to avoid such charges.

Monitoring the Operational budget is the most crucial part in the operation of business. With the modern technology and the computer software, daily updated total expenses against budgeted amount are made possible and easy to trace in order not to exceed the budgeted amount. Every end of the month, the Accounting Department distributes copies of last month's budget outcome to the General Manager and the Department Heads in order for them to review and analyze where their budget is in line and where it is not. General Manager will require the department head that have exceeded their budget a reasonable report since he is accountable to the corporation as well as the owner of the hotel.

Creating a personal budget is at the core of financial freedom. If you do not have a plan to track how you spend your money, chances are things will get out of control. Once this happens, it is much harder to get back on track than if you had followed a plan all along.

How do you make a budget? Where do you start the budgeting process? Well, here are some tips on creating your own monthly budget plan.

Creating List of Income and Expenses

The first step in creating a workable family budget is to make a list. List all of your income first. It is important to include all of your sources of income. Even that small interest check that comes in should be listed. If you cut the occasional neighbor's lawn, put down those ten bucks. Little things add up, and having an accurate picture of your income is very important.

Next, list all of your regular bills. These include things like your mortgage, auto and home insurance, electric, water, cable, phone, cell phone, and any other regular monthly bills. List when they are due and how much each is. If it fluctuates, write down an average amount.

After you have listed your regular bills, you should account for any other types of expenses. This means things like groceries, gas, clothes, personal items, haircuts, and other variables.

It is important to also budget in your fun items. These are different for everyone, but examples could be things like movies, scrapbooking, eating out, and stamp collecting. If you don't budget money in for those things then you will quickly become disillusioned and give up on your budget.

Finding Areas Where You Can Cut Back

So now you have listed all of your income and all of your expenses. If you have a hard time thinking of all the categories, there are lots of great budget spreadsheets and budget programs that will help you make up your financial plan. Take your total expenses and subtract them from your total income. This will give you the amount that you are over or under budget.

If you are over your budget that means that you are spending more than you make. This is a very bad thing. For many of us, that overage ends up on a credit card. Then you are paying interest and this is just not necessary. You should never use a credit card to supplement your income.

Take the number that is over and see where in your personal budget you can cut back. Sometimes that means making hard choices and giving up some things. In the end, though, the reward is worth the effort.

While some people think of a household budget as a constraint, it is actually allowing you freedom from stress and worry about finances. You know that the money has been set aside for your expenses and you can focus all that energy on other things.

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 store bookshelves and online sites, 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.

Despite all the options available, getting started with a budgeting process can be fairly simple. There are just a few categories of budgeting tools available. I'll give a brief description of each one and you can decide what's best for you - or read my next blog on "How to select the best budgeting tool for you." 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.

Budgeting Money Method #1: Pencil, paper and calculator
Certainly the oldest method around, it works fine but has it's drawbacks. Access to the budget forms is the easy part. You can either create some simple forms on paper that you're comfortable with or you can search for the forms online that you can download for free or very inexpensively. That's the easy part.

The downside of the pencil and paper method, even with assistance of a calculator, is that the user must know the basic financial calculations. Even if you are savvy in the mathematics, there is the issue of lack of speed, accuracy and repeatability. Making changes is difficult at best and each month the process and amount of time needs to be repeated. With the amount of effort required, most people simply give up.

The pencil and paper method is good, however, for first time budgeters that need to keep track of your daily spend. Keep a piece of paper in your wallet or purse and write down everything you buy, even if it's on credit card or via check. Doing so will enable first time budgeters to establish a baseline of where their money is going. (Cost: approx $0)

Budgeting Money Method #2: Computer Spreadsheet such as MS Excel
Most computers have some type of computer spreadsheet program such as Microsoft Excel or Apple Numbers installed. Such a spreadsheet program allows you to create an electronic form (called a spreadsheet), embed all the financial calculations and then simply enter your financial data. The computer does the calculations dynamically and you can see your results interactively on the screen.

There are several advantages of using a computer spreadsheet:
• Time savings increases each month
• Accuracy of the calculations
• Repeatability month after month

The downside, If you are not an expert at MS Excel or the finance calculations, it will be difficult to create your own budgeting forms from scratch. However, there are some excellent MS Excel budgeting forms on the market that are "ready made" for first time budgeters. Some of these MS Excel forms will even generate pie or bar charts to display easy to understand. Do some research online and find one that meets your functional requirements and meets your budget. Make sure your computer has the MS Excel program installed on your computer. (Cost: less than $20 for the forms; MS Excel extra if not already installed on your computer).

Budgeting Money Method #3: Computer programs such as Quicken
My comments on computer programs such as Quicken are relative to their capabilities as budgeting tools, not financial planning tools. Many of these programs have the advantage as broad financial planning tools that can be used for everything from budgeting to wealth management and even bill pay, but usually lack good budgeting capabilities.

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

Many of the computer programs simply look at your past spending habits to create your budget. So if you had a budgeting problem in the past, it is simply carried over to succeeding months. The computer program does not correct any spending or behavior problem that led to poor budgeting.

The disadvantages with these commercial financial planning computer programs include:
• Expensive. For Quicken you will shell out $40 for just the Starter Edition, $60 for the Deluxe and $90 for Premier.
• Complexity. Again, most are designed for much more than budgeting and can be difficult to use, especially for first time budgeters.
• Time incurred in learning and using these programs can be lengthy for simple budgeting requirements
• Don't teach good budgeting techniques

If you are going to invest that kind of money and time, seek out a budgeting program that actually teaches you how to budget!

Budgeting Money Method #4: Online budgeting programs such as mint or Mvelopes
Convenient and free budgeting tools are popping up everywhere on the internet and as smartphone apps. The accessibility is hard to beat but which one do you choose? Are online budgeting tools even a good idea from a security standpoint?

Let's start with the last question first. You need to be aware and be comfortable with the idea that you are sending your financial data back and forth over the internet. This is very different than online banking. When you perform electronic funds transfer or electronic bill pay through your bank, you have all the protection that your bank has deployed to protect the information. That may not be the case with a non-banking institution set up with online budgeting programs. Just do your research and be mindful of security issues.

If you are okay with the security issues, then you probably did your research and selected an online budgeting tool that you're comfortable with. That's the highest priority in selecting these tools.

The advantage of these tools is the ubiquity of having your information on various media when you need it: On your smartphone when you're shopping, on your laptop when you're at the library or coffee shop, or on your home PC when you're at home. Virtually anywhere you have browser access to the internet you can access your budget to see if you are on track.

Budgeting Money Method #5: Behavior-based Budgeting Method
There's a new method I'm proposing which can include any of the 4 methods above, but incorporates a new way of thinking or behavior. If you apply my definition of budgeting: a set of learned behaviors that help you manage your expenses relative to your income and provide you with a plan to get out of debt and reach your financial goals, then any of the 4 methods above will work because you changed your behavior!

Make a decision today to place budgeting high on your priority list, change your behavior, and start to see your financial goals realized.

To erase debt you need to budget. You need to create a budget and stick to it. Here are 6 Best Budgeting Ideas to creating a budget and getting started.

1. Choose a Budgeting Method

Choose a budget format that works for you. Just because all of your friends are Excel experts does not mean you have to use it too. If you are not good with spreadsheets then use pencil and paper. Or find a budgeting program for your computer. Or use an online budgeting tool. But find something that you are comfortable with and that you can easily use. You do not want to be struggling with some huge learning curve as you begin to get out of debt. That will just frustrate you. Keep it simple.

2. Account For All Income

Account for all income coming into your family household. Do not leave anything out. Include bonuses, over-time, side jobs, child support, and any other money that can be counted as income. But make sure it is the net income (after tax money) and not the gross income (before taxes come out) that goes into your budget. If you use the gross income number your budget will appear to have more money available to your household than you really do. And that will lead you to spend money you do not really have.

3. Account For All Spending

On the flip side make sure you account for all your spending. Every last dollar you spend needs to be in your budget. Mortgage payment, rent, electricity, car payment, credit card payments, insurance, child care, medical, car maintenance and any other monthly expense. Also if you make a one-time purchase then you need to figure out where in the budget that fits and add it too. So if you buy a hammer at the hardware store then you better have a line item in the monthly budget to account for that purchase.

4. Budget to Pay Off Debts

Dedicate a section of your budget for paying off debts. All of your credit cards, car loans, school loans, money you borrowed from family and friends, store cards should go into this section. Your mortgage can be included here if you want but I would suggest keeping the mortgage out of this section and just focus on the revolving debt that you can pay off in a few years.

5. Budget to Save Money

Also include a section to save money. You do not want to budget to just erase debt. You want to build into your budget a plan to save money for the future. Line items for emergency funds, investment funds, general savings, savings for a vacation or your next car should go here. Once all of the debt is paid off then this section will grow faster and faster. You will look forward to budgeting for these items. Which means that even after you have paid off all of your debt you must continue to budget to properly save money and account for all of it.

6. Use It!

Use your budget forever. You can not just create a budget one day and think it's done and throw it in a drawer, never to be seen again. It must be used, edited, studied, modified, adjusted and looked at each and every month. In the beginning you may even refer to it weekly and sometimes daily depending on your spending and savings needs.

Choose Home Budgeting Software Based on your Needs

When you set up a budget, using Home budgeting software to help you set up and execute your budget is a very good idea. There many great benefits to using software such as the time-saving benefits, better accuracy, and overall efficiency.

When you are choosing Home budget software, start out knowing exactly what you need and want. Not every person has the same needs for software and budgeting.

Make a Plan you can Stick to

Designing your budget plan is very important. Make sure it is something that you can handle and get a lot out of. You should already know how much money you want to be saving each month and how much money you'll need the over.

Figure out the maximum amounts are allowed to spend within each category. For example, figure out exactly how much you're out to spend on entertainment each month, food, clothes, electricity and heat, mortgage, etc. Of course, some of these are fixed bills and will be easy to maintain and others may go up without realizing it. Need to accommodate for these things and adjust as necessary.

Keep at it

Even more importantly, keep sticking with your plan. You won't get anything out of budget if you don't stick with it. Even the best Home budgeting software will not make the money savings just happen. You actually have to take action and follow the budget.

If you go over your budget anytime, adjust you budget if necessary, but the next month try to do better. Every month that you do well, you will see results from. You are only hurting yourself when you decide not to stick with your plan.

Keep using your Home budgeting software as well. This is what's going to help you stay motivated and keep working. Make sure you find the budgeting software that fits your needs and qualifications. For example, don't get renters budgeting software if you don't have any renters.

Have you ever felt that your hard-earned cash is slipping through your fingers? Are you genuinely surprised by how much money you and your family spend? Do you regularly run out of money before the end of the month? Are you racking up credit card debts to fund the difference between what you earn and what you spend? Do you wish that you had more control over your personal budget or your household budget?

An envelope online budgeting program provides the answers to all these questions. Unlike conventional budgeting software, you do not have to collect receipts and spend hours at the computer entering and categorizing all of your transactions. An envelope online budgeting system does this for you automatically because it links electronically to all of your bank accounts, credit cards, store cards and other financial accounts at thousands of financial institutions throughout the USA. Each transaction that you make is automatically registered by your online budgeting account, so that you always know the current status of your finances.

An envelope online budgeting system enables you to manage your personal budget effectively because you can allocate portions of your monthly income to different areas, each of which has its own separate "envelope". For example, you could allocate $500 per month to the groceries envelope. Each time you spend money on groceries, the total amount in this envelope will be reduced so that you always know how much more you have available to spend on groceries before the end of the month. Such a system helps you to be in control and to minimize unnecessary spending on impulse purchases.

Your household budget can also be effectively managed using an envelope online budgeting program. You can pay all of your bills online using the system, saving you valuable time and eliminating postage costs. You and your spouse can both access your household account wherever you have access to the Internet, so that you can both know how much money you have left to spend each month whether you are at home, at work or on the move with your cell phone.

It is also easy to use an envelope online budgeting system to plan for future expenditure. For example, the system enables you to easily set aside a regular amount each month so that you can save for your annual vacation. Instead of using credit cards to fund the vacation, you will be able to pay for it outright and get rid of the debt-related worry that often follows carefree vacations.

Research has shown that the average user of an envelope online budgeting system saves approximately 10% of their income each month, because they are more aware of how they are spending their money and are less likely to make unwise spending decisions if they are keeping their finances under such tight control. Just think how you could use all of that extra money - you may wish to put it towards paying off your mortgage several years early or you may even be able to retire at a younger age than you expected.

In addition, an envelope online budgeting system is generally user-friendly, very secure, well-designed and cost-effective. This method was voted one of the top 100 products of 2006 by a well known publication. You don't have to take their word for it, however, as most online budgeting services will allow you to try their service completely free of charge and without obligation for one month. Why not give it a go and see if it helps you to improve your financial situation in just one month? You have nothing to lose and who knows how much you could gain. Good luck in your quest for success in managing your personal budget or your household budget.

Setting up a budget is a necessary and important tactic to use to ensure that you are living within your means and are on the right track. Budgets can help you to achieve a financial goal that is far off in the future. Setting up budgets with and for your children is a very good idea for it can instill good financial practices at an early age. Setting up budgets for your younger children can help them to save up for something special. They can earn money around the house and then determine how much of that should go to their savings and how much they want to use for daily use. This will allow your children to see what it is really like to save up for something that they really want. They will be able to weigh what is more important to them in terms of financial means and see what it means to sacrifice in the short term to gain more in the long term. Using budgets to save that extra cash allows your children to be able to see where their savings are going.

A family budget can allow your family to save up for a common goal. Whether it is a vacation or a new pool, a following a budget is a great way for the entire family to come together a put their efforts into a common goal. Family unity is important when determining where the extra cash flow should go. Preparing budgets can also allow you to be prepared for emergencies and other unfortunate occasions. It is important to know that in a case of emergency your family will be covered. Having this peace of mind will allow you and your family to be comfortable enough to know that in something unexpected happens you will have enough funds to cover the costs.

Setting budgets for retirement is a very important thing to plan for. Once you have actually retired, budgeting is going to basically be your way of life. For you have planned for this time in your life where you no longer have to work, but you must make sure that you spend your retirement wisely. If you set up your budgets wisely and responsibly you should have more than enough money to live off for the rest of your life. Retirement is a great stage in your life that could be filled with joyous occasions if you plan for them correctly. It is important to realize this when putting money away for retirement so that you budget correctly.

Overall budgets are apparent at every stage in life that helps to you to realize your financial goals. Budgets help you to decide how much of your resources should be allocated where. It is important to budget your money so that you can keep your finances on track and be able to save up for something important like retirement. Keeping your finances in order allows you to live a better life free of financial worry.

A healthy home budget is the key to wealth, success and even a healthy family life. American and Canadian Families could create a much healthier home budget with a bit of discipline and planning. Ask a Consumer and she may tell you, up front, that paying the Grocery Bills gives the greatest cause for concern in the family's home budget. Too often, money creates family fights. Paying bills, the Home Budget and family finances too often cause divorce. Parents can avoid such calamities with financial discipline, greater research and some professional help. Unfortunately, areas for greatest financial relief too often lie off limits, outside of the usual scrutiny for possible savings in the family's home budget.

These three areas: Mortgage Payments, Taxation of Income and Credit Card Debts drain away the family's fortunes in ways we least suspect. In trying to reduce expenses from the Home Budget, you can dismiss high gas prices as a temporary event. Fluctuations in fruit and vegetable prices due to vagaries of the weather can impact the monthly home budget too. Those numbers pale in comparison to the heavy hitters in a home budget, such as Income Taxes paid, Mortgage Interest and excessive and un-necessary loan or Credit Card Payments.

An annual, Income Tax Refund Check can offer relief in many a Family Budget. In order for your family to benefit, you must arrange your finances to profit from all income tax deductions you might be entitled to. You may hear about certain deductions. But since you, like many an employed Consumer, are no Finance Wiz, you tend to ignore them to your peril. Unfortunately, as an Employee, your income tax deductions are limited. They are almost cast in stone by government legislation. As a Business Owner, however, the rules are much more generous. You could save huge sums in income tax payments because of business expenses. Fortunately the distinctions and the rules are not quite as rigid as you might think. Let's leave out the obvious personal deductions, medical, and educational expenses and similar employee and work related expenses. Here are some additional income tax deductions you can snag if only you had the know-how. These tax deductions, when astutely applied, would add considerable income to your home budget:

1. You can create a Home Based Business and immediately qualify for related expenses as income tax deductions

2. You could increase your Savings for Retirement and for your Pension to create additional income tax deductions

3. You could use Other Peoples Money for Investments. Here again is a third very legit means for tax deductions most Consumers are not familiar with.

These are three key areas around which you could build substantial tax deductible expenses and hence keep a much larger portion of your income. They could add to the Income portion of your Household Budget and significantly reduce expenses.

On the expense side of the Home Budgets, American and Canadian Families pay way too much in housing costs. A recent study of home finance revealed that the cost of housing approaches closer to 50% of the household budget than the 30% and 40% debt service ratios, which bankers use in screening applicants for mortgage financing. Rising House Prices and lower interest charges have allowed many to occupy homes they may soon be unable to afford. Tenants have used rent money to purchase homes. As interest rates continue the recent upward trend, foreclosures will increase and Canadian and American Households as Tenants or Home Owners will be priced out of their regular home expense budget.

Newer approaches to mortgage payments have uncovered huge sums of excess profits that Lenders have been enjoying for years at the expense of the average Home Owner. These studies found that over the life of a mortgage, Consumers typically hand over DOUBLE the Purchase Price of their Homes as extended and un-necessary mortgage payments. At a time of record low interest rates, these large sums represent a voluntary contribution to the Lenders' Profit margins. In the event you are hearing of these developments for the first time, then this over payment of a mortgage applies to you too. Almost every mortgage holder pays too much! Consumers as a group have been cajoled into giving our infinite trust to the Loan or Bank Officers. What we failed to realize is that in the lending industry, no one represents the interests of the Consumer. You must seek out your own professional for help.

The final item of Credit Card Debt relates to impulse buying of clothes, shoes, trinkets, entertainment and vacations, CD's, snacks, lattes and other consumables. Such expenses dramatically increase the monthly household expenses. As a Parent or Single Mom, responsible for the Home Budget, you would be shocked to review actual expenses from impulse and non-essential purchases. One Bank engages a prominent Financial Planner, who advises Customers to refrain from needless expenses on items such as cigarettes, lattés, candies, coffee, and gum. These savings, they claim, could help to create a tidy retirement fund.

With a bit of discipline, Consumers could reduce expenses by huge amounts in differing ways: 1. At $10.00 a purchase, you could drive a Mercedes Benz by giving up 6000 Trips to the Dollar Store. 2. At $40.00 a pack for cigarettes, a Consumer could have the entire gas bills paid if he simply quit smoking 3. A $250.00 a month Retirement Savings Contribution could result from ignoring the daily craving for an expensive latté or the three cups of coffee a day habit.

These expenses, when paid by cash, reflect an unnecessary drain on the household budget. Because of service charges, the drain is even more severe when you use Credit Cards and even Debit Cards for small and impulse purchases. All of a sudden, that Latté which costs you $3.50 is in fact $4.50 if the Credit or Debit Card Company charges a $1.00 fee for each transaction. After one month, that two Lattes-a-day habit becomes a $140.0 a month cost. With maximum financed credit or debit charges they become a $200.00 to $250.00 a month expense.

Consumers can generate huge savings to the Family's Home Budget from a bit of research and from prudence and discipline in household expenses. It is vital for you to understand mortgages, loans and credit expenses much better. With a little tax planning, some stinginess and some savvy, Consumers can improve the household budget in ways they least expect. As a thrifty Consumer, you must start the search for more efficient ways to run your family's home budget. The pay back would be terrific.