Budget

How to budget your money?

What is a budget?

►A tool to manage your money

►For a specific period of time – usually

monthly

►Budget due to our limited resources

►Helps us meet our responsibilities and our

financial goals

Reasons for a Budget

Track spending

Money toward expenses/bills

Avoid careless spending

Eliminates stress

Live within your means/income

Meet financial goals

Save

Invest

…Puts you in control of your financial future,

beginning NOW.

Without a Budget…

Have no plan

Paycheck-to-paycheck

Come up short

Plan for emergencies

No savings/investing plans

Less likely to know what $ you have

How to Build a Budget

1. Decide on a time frame for tracking expenses (monthly)

2. List all money you have coming in (income)

A. Disposable income

B. Discretionary income

3. PYF (Pay yourself first) = Savings

4. Make categories for all expenses

5. Subtract total expenses from income

6. Study budget and make changes

PAY YOURSELF FIRST!

Every time you PYF, you are developing a saving habit that leaves you with more money to spend later on for things that are really important to you!

Save 10% of your disposable income each time you get paid

Budgeting Terms

►Budget – tool for money management

►Disposable income –after taxes

► Discretionary income –after all expenses paid

►Expenses:

Fixed expenses –monthly contractual

Variable expenses –not contractual, vary each month

Periodic fixed expenses

What is included in a budget for a family in a given month?

The typical family spends their money on:

►Housing - 30%

►Transportation - 20%

►Food -15%

►Utilities, Home Improvements - 14%

►Saving - 10%

►Insurance - 7%

►Other - 4%

What does it look like?Budget Template

Income Amount

Wages Rs.

Total Income Rs.

Expenses Amount

Fixed Expenses

PYF (10%) Rs.

Variable Expenses Rs.

Periodic Expenses Rs.

Total Expenses Rs.

Net Gain or Net Loss Rs.

Allocate money to each category

► Net gain – Rs. remaining to either save, spend or invest

► Net loss - spending more money than earning and has to use credit (borrowed money) to meet their financial obligations

Income ExpensesNet gain or loss

Implement and Control► There is not one correct control system.

Depends upon the individual/family Envelope systems – individuals place the actual

budget amount of cash from a paycheck into a specific envelope system for the expense

Check register system – helps consumers to track all expenditures in a checkbook register which has been divided into spending plan categories

Electronic spending plan systems – multiple types of software are available for consumers to use to help keep track of their financial records like www.mint.com

Net worth statement

► A net worth statement describes an individual or family’s overall financial condition on a specified date

► The components include:

Assets – Everything a person owns with monetary value

Liabilities – Debts or what is owed to others

Net worth - The amount of money left when liabilities are subtracted from assets (indicates wealth)

Assets LiabilitiesNet

Worth

ANY QUESTIONS?

THANK YOU…

BY:-TUSHAR KANDPAL