What is Budget?
Budget was derived from a French word bougette, which means purse. Budget is an essential concept not just in macroeconomics but as well as microeconomics. It is a financial plan concerning the process of saving and spending money. There are several types of budget. However, this article will be focusing mainly on the personal budget.
Personal budget is a vital financial plan needed by every individual. It helps a person properly apportion expected income with regard to expected expenditures. Personal budget also deals not just with income and expense but also with savings and personal debt repayment.
A budget is created based on a person’s history of spending and debt. A person must learn to create his or her own budget plan as to avoid bankruptcy. It is always wise to monitor your own personal cash flow. A well-crafted budget plan will help an individual extend the buying power of incoming cash flow.
Several tools are available so that each individual may create a budget plan. It depends on the available resources or the creativity of the individual. However, tools will always depend on how an individual is going to utilize them. The precision of a budget plan will depend on how accurate is the presented budget data. It is necessary to keep up with the current budget data and avoid depending on the old budget data.
The traditional tool for creating a budget plan is the pen and paper. A budget plan is not required to be complicated. A simple budget plan with a complete and updated budget data is more important. Using the pen and paper, an individual may list down all expected income and expenses. A simple table may be drawn to manipulate the data easily. An optional calculator may be used.
Modern technology has provided people with computers. Today, many spreadsheet software programs are available, which are specifically used for performing both simple and complex calculations. Microsoft has its MS Excel and OpenOffice have their similar version, which is the Calc. The advantage of using spreadsheet software such as the MS Excel is that the computation can be automatically set. Moreover, you do not have to keep files on paper.
For more complicated budgeting tool, there are specific software programs that are used for money-management tasks. Quicken, GnuCash and Moneydance are some products specifically designed for money management. Such programs can manipulate data such as individual account information like savings, checking and foreign exchange accounts.
An individual must learn how properly allocate the income towards individual expenditures. It is also important to create a flexible budget especially those who have irregular income. Unfortunately, most people bring along a negative implication about budgeting. This is the reason why most people do not prepare a budget plan and in the end have a difficult time keeping up with their expenses. Still, the best guideline when creating a budget is to live below the means.