Creating A Budget

							Title:
Creating A Budget

Word Count:
495

Summary:
Many people do not consider the imp
ortance of a budget. They indulge i
n spending according to their earni
ng and do not leave room for emerge
ncies. This usually ends up in the
incurring of debts and sometimes, p
ersonal bankruptcy. A budget helps
to counter these consequences.

The essential calculations in a bud
get are income and expenditure. The
 purpose of a budget is to ensure t
hat the expenses do not exceed the
income and also provide for savings
 for the future.

A budg...


Keywords:
budget, money, income, expenditure,
 spend, costs, houses, food, luxury
, debt, owe, loan
Article Body:
Many people do not consider the imp
ortance of a budget. They indulge i
n spending according to their earni
ng and do not leave room for emerge
ncies. This usually ends up in the
incurring of debts and sometimes, p
ersonal bankruptcy. A budget helps
to counter these consequences.

The essential calculations in a bud
get are income and expenditure. The
 purpose of a budget is to ensure t
hat the expenses do not exceed the
income and also provide for savings
 for the future.

A budget needs to be documented in
the form of a chart or table. This
needs to be easily comprehensible a
nd provide a quick summing up of th
e relevant details. The chart needs
 to effectively reflect the differe
nt heads of expenditure. Suggested
heads are housing and utilities, en
tertainment, health and beauty, tra
nsportation, communication and hous
ehold. These can be further subdivi
ded as follows:
Housing and utilities

-   Mortgage payment or rent
-   Insurance
-   Taxes and electricity
-   Natural gas
-   Water and garbage pick up

Entertainment
- Cable television or satellite serv
ice
- Internet access
- Dining out
- Bars clubs

- Sporting events, parties, lessons
and recitals

Health and Beauty
- Hair-cuts, perms etc.
- Make-up
- Medical, dental, vision, weight lo
ss, diet products
- Nutritional supplements

Transportation

-   Car payments, insurance
-   Gas
-   Routine maintenance, repairs
-   Air travel
- Rental cars, public transportation


Communication

- Telephone
- Cellular phone
- Voice mail

Household

– Groceries
- Cleaning supplies
- Laundry, dry cleaning
- Home improvement
Projects, towels, linens

Others

- Credit card payments
- Other loan payments
- Child care, items for baby/elderly

- Allowances for children, book clu
bs, magazines, music, etc., fast fo
od
- Investments, vacation, spending m
oney, donations to church or charit
y
- Gifts (Christmas, birthdays, anniv
ersary, etc.)
- Emergency fund
- Cigarettes.

If you have any other expenses that
 are not covered, you could add the
m to the list.

Next, try to reflect all expenses o
n a monthly calculation. For exampl
e, if you pay yearly taxes, calcula
te the monthly expense by dividing
the yearly amount by twelve. Having
 done this, add up all the figures
to arrive at the total monthly expe
nse figure. Then subtract this amou
nt from your take home salary amoun
t. If you find the remainder in neg
ative, you need to look for expense
s where you ought to cut down. For
example, if your take home salary i
s $1000 and your expenses total to
$1150, you would need to trim down
$150 each month, from the expenses.

If you need to cut down on your exp
enses, you would be the best judge
to decide where to make the changes
. However, it would be prudent to c
ut back on the extra subscription c
hannels of the television. If you a
re smoker, cut down on smoking inst
ead. Take home cooked lunch to offi
ce instead of eating fast food. Eco
nomize on power consumption by avoi
ding unnecessary use of the air con
ditioner and heating and make less
use of the phone.

Creating a budget is absolutely nec
essary to manage your finances and
is not dependent on the size of you
r income. It helps to prevent overs
pending and personal bankruptcy, al
lowing you keep track of your incom
e and expenditure.