A budget, in very technical terms, quantifies the amount of financial income and expenses over a period of time. Budgets are used everywhere, from personal monthly budgets involving income and bills, to multi-national corporations’ quarterly expenses and income reports. Everyone uses budgets for financial planning, in personal and professional ways. Budgets allow the creator to control resources and provide accountability for how the resources are used.
What is in a Budget?
Budgets are used in all successful businesses as a point of discussion regarding plans of action – changes in financial status, whether income generated or expenses accrued, can measure whether the business action has been successful or not. Budgets can also be a device to forecast potential pitfalls – for example, if the business is in the red for the previous quarter, the business might have to cut back on staff, product, or other expenses to make up for the financial downfall.
Individuals also use budgets, primarily to help keep track of expenses compared to income. Budgets can also help small business owners or independent contractors keep up with possible tax write-offs or other expenses. A personal budget should include:
- Income: whether from a job, inheritance, stocks and bonds, or other source, all sources of income should be listed with their dollar amounts. If these fluctuate, the budget should reflect the fluctuation.
- Fixed Expenses: these include rent or mortgage, phone, groceries, and utilities. If you use a budget to save money, put a fixed amount in this budget line so that you never forget to save that amount.
- Possible or variable expenses: these can include dinners out, office supplies, gym memberships, and “fun” expenses like movies or books.
These types of budgets are very important if you find yourself overshooting your income consistently every month. Budgets can help individuals track side expenses, calculate how much actual money they have, and how much “slush fund” can be used to for unnecessary expenses.
Why Should I Make a Budget?
If you find your personal or business expenses routinely overwhelm your actual income, a budget will help you keep track of those expenses, where the money “disappears,” and where you can cut back to keep within you budget guidelines.
Budgets are not just for money. Sometimes, people trying to lose weight or eat healthier will keep a “calorie budget,” which keeps track of which foods they eat, and how many calories and other nutrients are in the foods. This can help the dieter eat primarily fruits and vegetables, along with lean meats, and avoid unhealthy fat and sugar as much as possible.
Corporate budgets appear only once a year, unlike most personal budgets, and require a considerable amount of input from multiple departments on their income and expenditures. This helps the company remain on track and on mission, ensuring that all employees work in necessary positions and departments. In a similar manner, government budgets – from city to federal – come out once per year, and calculate the previous year’s debts and income, along with forecasting income from tax revenue and other sources, which allows lawmakers to plan for possible improvement projects for the upcoming year.
Why Should I Use a Budget Template?
If you are an individual or a small business owner, you may be confused about the best way to start budgeting your income. Our free downloadable budget template can help you write in any line items for income and expenses, and can help you calculate the difference between these two financial points. You can create or delete line items as they become relevant, and you can change the amount of money in each expense and income field to help generate your final monthly – or perhaps yearly – budget. Download our free budget template today.