Budgeting Techniques 16-2 Goals: -Identify purpose of a budget Describe steps for preparing a budget Describe characters of successful budgeting

The main purpose of a budget: Budget activities Budget allows you to meet your personal goals with a system of saving and wise spending. The main purpose of a budget: Live within your income Achieve your financial goals Buy wisely Avoid credit problems Plan for financial emergencies Develop good money management skills

The process of creating and using a budget Involves four main steps: The Budget Process The process of creating and using a budget Involves four main steps: Set financial goals Plan budget categories Maintain financial records Evaluate your budget -Fixed expenses are costs that occur on regular basis and for the same amount each time. -Variable expenses involve living costs that differ each time and may not be an easy estimate.

The Budgeting Process cont… Allowance is the amount of money you plan to use for certain budget category 8 main catagories used while budgeting: Saving Food Clothing Household Transportation Health and personal care Recreation and education Gifts and contributions -Any difference between these amounts is a budget variance

Characteristics of an effective budget: Successful Budgeting Characteristics of an effective budget: Must be realistic Should be flexible Should be evaluated regularly Must be well planned and clearly communicated Should have a simple format

Assessment 16-2 true/false. Retirement planning is usually considered a short term goal. A major purpose of a budget is to Assist with comparison shopping Achieve financial goals. Reduce a persons enjoyment of life Gather data for using credit cards 3. The most uncertain aspect of the budgeting process involves estimating Variable expenses Determining net worth Estimating fixed expenses Setting finical goals