Preparing The Budget PDF

PREPARING THE BUDGET LESSON 4 - PREPARING THE BUDGET This is about BUDGET This is about PLANNING But... WHY? 02/10 The Coin Co Budgeting Report Why is budgeting important? 1 Financial control:...

PREPARING THE BUDGET LESSON 4 - PREPARING THE BUDGET This is about BUDGET This is about PLANNING But... WHY? 02/10 The Coin Co Budgeting Report Why is budgeting important? 1 Financial control: Budgeting helps Goal setting: Budgeting helps individuals and organizations set 3 Planning for the future: Budgeting helps individuals and organizations plan for Decision-making: Budgeting provides individuals and organizations with valuable information individuals and financial goals, such organizations gain a the future by to make informed as saving for a down better understanding estimating their financial decisions. payment on a home, of their income and income and expenses With a clear paying off debt, or expenses, allowing over a period of time. understanding of their starting a business. them to control their This enables them to financial situation, With a budget, spending and avoid anticipate and prepare they can decide where individuals and overspending. for any financial to allocate their organizations can challenges that may 4 resources and make allocate their 2 arise. choices that align with resources towards their priorities. achieving these goals. 03/10 WHAT IS A BUDGET? - Is a written outline of the list of expenditures to be spent in the future. It is a kind of advance spending outlined on paper. It is a road map that allows you or your family to live within your means and allotting extra money to save for long term goals. Having a budget is the first crucial step in effective management of your finances. 04/10  IMPORTANCE OF 1. BUDGET It shows how money is going to be spent and where it is going to be spent 2. It helps predict how much money is going to be spent, considering the available funds that will cover the expenses. 3. It systematizes the allocation of the money to the needs and desires of the individual or the family. 4. It helps in prioritizing the needs before the wants. 5. It helps in threshing out problems concerning needs and money when expenses are clearly itemized in the budget. 05/10  IMPORTANCE OF 6. BUDGET It helps balance income and expenses, thus removing tensions and anxieties. 7. It is an approach to training the children on how to handle their allowances properly. 8. It maximizes the use of money on the most important needs of the individual and the family. 9. It enables the realization of the short-term goals in relation to long-term goals. 10. It ensures the satisfaction of the individual and the family because it assures that needs and desires are met. 05/10 STEPS IN MAKING A PERSONAL BUDGET 1. Add the available amount of funds in the budget. 2. List down the major items of expenditures for the month (in the case of a monthly budget). It helps one to study the expenses for the previous month. 3. Determine the percentage allocation for each item of expenditure. 4. Compute the percentage equivalent of each item of expenditure to the budgetary outlay. 5. Total the corresponding amounts for all the items. 6. Deduct the total expenditure from the total 06/10 income or budgetary outlay. ELEMENTS OF A BUDGET 1. FOOD 2. SHELTER AND OTHER RELATED NEEDS 3. CLOTHING 4. HEALTH NEEDS 5. EDUCATIONAL NEEDS 6. SOCIAL AND RECREATIONAL NEEDS 7. TRANSPORTATION AND OTHER MISCELLANEOUS EXPENSES 8. CONTINGENCY FUND 06/10  1. FOOD - The amount of money spent on food depends on the family size and income. If the family is big, generally it needs a bigger appropriation for food than a small family. Big families with limited income may spend more of their income on food, while small families with high income may allot a lower percentage of their income on food. Other factors that may affect the food budget are the family members' eating habits, members' likes and dislikes, cultural 04/10  2. SHELTER AND OTHER RELATED NEEDS - These include house rental (if the family is renting), maintenance cost or home improvement, and real estate taxes (if the house is owned by the family). Other related needs include services such as electricity, water, telephone, and other services needed by the family. 04/10  3. CLOTHING - Today's clothing needs have become secondary to other needs of the family like food, health, and education. Clothing need is dictated by the nature of the occupation, the type of social circle one belongs to, and the status symbol that goes with it. However, it is important to always consider the quality of the materials used for the clothing to maximize the money allocated for its acquisition. 04/10  4. HEALTH NEEDS - The health needs of the family or the individual in terms of periodic medical and dental checkups, hospitalization, medicines, and health supplements should be considered priorities. Any amount must be set aside every month. This shall serve as your or health-related emergency or contingency fund. This amount saved every month can accumulate over time. It can be used for non-health or health related 04/10 emergencies and would not affect the 5. EDUCATIONAL NEEDS - The education of an dividual is considered a need even among the poorest of families. Many parents are aware of the value of education in ensuring a bright future for their children. They even have to sacrifice their own needs just to give priority to the educational needs of their children. 04/10 6. SOCIAL AND RECREATIONAL NEEDS - Provisions for social and recreational needs serve to balancing outside play. Recreational activities like outings, going to movies, eating outside, and attending social gatherings and Reunions are family gatherings that will be remembered by the family members later on. 04/10 7. TRANSPORTATION AND OTHER MISCELLANEOUS EXPENSES - The cost of transportation today is becoming more expensive and has become a real necessity. If the family owns a car, there are expenses for fuel and maintenance that must be part of the monthly budget. A different budget is used if the family uses public transport going to and from work or school. Miscellaneous expenses are entities such as toiletries, appliances, insurance, 04/10 gadgets and appliances, taxes, and 8. CONTINGENCY FUND - A small percentage of the income should be set aside for needs that may unexpectedly arise. To some families, savings that are set aside every month can serve as a contingency fund, Accumulated savings can be used to realize long-term goals such as buying a house and lot or buying a car. It can also be invested in land or crops, stocks, and bonds that can make the savings grow. 04/10 Summary QUESTIONS? The Coin Co