Budget means a proposal or an allotment in finance management. A proposal may contain a sort of financial prediction which is allocated by predicting the expenses of each and every process of a complex project. A budget allotment is fixing of money to spend on a particular thing. This statement is mainly prepared based on the cash basis, estimation of all expenses and future ideas are taken into consideration in budget calculating. Even though, savings and investments are the ways to get money, that also taken into consideration while planning the budget. Because for investment and savings: one has to pay the bills from his own income.
Estimating the Total Amount of Income
An income is a source of money which is earned and not has to repay it. The money which has to repay is not considered as income. The first stage to calculate budget is estimating the total amount of income for a month or the whole year. This income estimation should include more overall sources of income like each individual pay, commissions, interest, annuity income, investment income, rental, and asset.
Estimating the Total Amount of Expenses
The most critical stage is the prediction of monthly expenses. Because of its random and complex nature, it is hard to remember all the expenses going to happen. Looking into last year’s expense report may help in this stage. The bank and credit card statements may help at this level. The major factors taken into account in calculating expenses are housing, utilities, food, transportation, medical, insurance, clothing, taxes, appliances, personal care, entertainment, saving and investment, and other expenses. In the case of medical disabilities and childcare has to be taken into considerations with more importance. Spending the money for fun by families may occur as they wish, so it is also important to include fun expense also.
Calculating the Final Budget
Finalizing the budget by summing up the total income in one column and total expense in another column. Then to compare the predicted expenses and income, wheat-ear the available money is surplus or deficient. If it is surplus the budget can be finalized and taken into action. If it is a deficit, then need to go back to expenses to avoid possible things to get the right budget. The deficit money can also be adjusted by increasing the ways of income. Budget is complete which all the expenses are balanced by the predicted income.