Showing posts with label Budgeting. Show all posts
Showing posts with label Budgeting. Show all posts
When you hear the word “budget”, what does it mean do you? If you’re like most people, you probably think of it as an unpleasant activity that means you have to financially deprive yourself. This couldn’t be further from the truth, yet this is the typical reason that most budgets fail.
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Creating a budget may not sound like the most exciting thing in the world to do, but it is vital in keeping your financial house in order. Before you begin to create your budget it is important to realize that in order to be successful you have to provide as much detailed information as possible. Ultimately, the end result will be able to show where your money is coming from, how much is there and where it is all going.
Creating a Budget Doesn't Have to be Hard
For most people, the word “budget” conjures up thoughts of penny-pinching and the unpleasant task of crunching numbers. This couldn’t be further from the truth. A budget is at the cornerstone of a solid financial foundation, regardless of your situation, and it isn’t that hard to do.
What is a Budget?
A budget is nothing more than a breakdown and plan of how much money you have coming in and where it goes. Could you imagine a business becoming successful if it didn’t keep track of its income and expenses? The same holds true when it comes to your personal finances. If you don’t know how much money you have coming in and where it goes, your road to financial success will be a difficult one.
Just as a ship that needs to be navigated properly to reach its destination safely, a Company needs a well-planned budget to help achieve its goals.
Budgeting, like any other activity, is subject to the interpretation of each practicing organization. Budgeting is the process of preparation, implementation and operation of budgets decisions into specific projected financial plans for relatively short periods of time. In other words, budgeting is the process of “translating financial resources into human purposes” (Wildavsky, 1986).
Budgeting is also viewed as a process of identifying, gathering, summarising and communicating financial information of an organization’s future activities. Blumentritt (2006) further explained that budgeting processes include a review and study of the prior period’s financial results, projections for sales, operating expenses (fixed, variable, and semi-variable) and financing expenses, examination of proposals for capital expenditures, and means of rolling up and rationalizing figures from different functional departments to ensure they meet company-wide profit expectations.