Chapter 43 Budgeting Techniques

Budget The main purposes are to help you. –Live within your income. –Achieve your financial goals. –Buy wisely. –Avoid credit problems. –Plan for financial emergencies. –Develop good money management skills.

Budgeting process The process of creating and using a budget involves. –Setting financial goals. –Planning budget categories. –Maintaining financial records. –Evaluating your budget.

Setting Financial Goals Help you decide where you would like to be financially and develop your budget accordingly. Writing down your short term and long term goals will help you assist in deciding in how you want to spend and save your money.

Planning Budget Categories Fixed Expenses –Are costs that occur regularly and are for the same account each time. Variable Expenses –Are living costs involving different amounts each time and are usually more difficult to estimate than fixed costs. Allowance –The amount budgeted for saving and other expenditures.

Budget Categories Savings Food Clothing Household Transportation Health and personal care. Recreation and Education Gifts and contributions

Maintaining Financial Records After planning a budget, individuals and families should set up an income and expenditure record to find out if there plan is working.

Evaluating Your Budget Compare your actual spending with the budgeted accounts. Any difference between these two accounts is called a Budget Variance.

Characteristics of a Successful Budget. Must be realistic Should be flexible Should be evaluated regularly Must be well planned and clearly communicated to those involved Should have a simple format