In this era, it is easy to get captivated by the success stories of business. But, do you know how many startups fail? Almost 80% to 90% of the startups fail.
Most people get unique ideas of doing a business but do all ideas work? The answer is “No”. The idea is just an idea until it gets you paid. People get an idea, but they don’t know if that idea will work or not. They don’t project their idea. They don’t know how much capital is required, what will be the projected revenue and what expenses they need to incur.
In personal life, From a desire to deliver, almost anything we want is only a few swipes, taps, or clicks away. If we don't have money, Hell Who Cares! What are Credit Cards for?
It is important to PLAN. You "Pay" for Money with your "Time". It is important to plan and choose how to spend it.
What is Budgeting?
A Budget is a financial plan to spend your money. It considers both current and future income and expenses.
Budgeting is a process in which the detailed projection of income and expenses are made for a specific period of time.
Budgeting can be done for a person, a family, a business, a government, an organization, or any other entity that earns and spends money.
Why Budgeting is Important?
Many people don’t realize sometimes that they spend more than what they earn and slowly their debt increases year by year.
Budgeting ensures that whether you have enough money for the things you need to do. It helps to control your spending, track your expenses, and makes sure your savings are more.
Budgeting is the basis for a business to succeed. If there is no plan, then it is difficult to achieve the business objectives
1. Budgeting helps you prepare for emergencies
Emergencies always arise at the worst possible time and without any warning. This is the time where you need emergency funds. The only way to have such funds is to spend less than you earn. This savings can help you in the time of emergencies. Budgeting helps you to save your fund which covers a few month's expenses. Even if the fund is used up at any point in time, there should be a priority to rebuild the emergency fund. This way budgeting helps you in times of emergencies.
2. Budgeting helps you to know where your money is going and control your spending.
Since budgeting allows you to create a spending plan it will ensure that you spend on the thing which you need and important to you rather than spending on unnecessary things. Budgeting helps throw light on bad spending habits. If you don’t track your expenses, you don’t know where your money is really going. Soon you will run out of money and will never meet your goals. Budgeting is important if you want to monitor your daily spending habits, understand the impact of small expenses, and take control of your spending.
3. Budgeting helps you avoid or get out of Debt.
If you have any kind of debt, like credit card debt or personal loans, you are servicing a high-cost debt. Not being able to pay this debt can push you into a debt trap. To get out of debt, you need to pay existing debt and not take on any new debt. For this, having a budget is a crucial thing. The budget helps you in planning your finances which helps you to save more and pay for the expenses and avoid taking debt in the first place. It also ensures that you don’t spend money you don't have.
4. The Budget helps to plan future projects.
Planning for future events is at the center of a business budget purpose. A yearly budget allocates projected earnings for the upcoming year and makes sure that there is enough income to fund activities and operations for the upcoming year. Comparing the past trends, a budget helps you to forecast the earnings and spends and provides a realistic income expectation and how to balance this income against your anticipated expenses. You can analyze the costs of doing business or focus on those activities that generate the highest returns. The aspect of budgeting is mostly aimed toward future planning.
5. Budgeting helps to take better financial decisions.
A budget is a computation of the revenues and the ways in which those revenues will spend in achieving the business goals. Budgeting helps the business make decisions on how to move forward. By forecasting funds, prioritizing projects, and allocating money to different sources, is the backbone of any good business plan.
6. A Budget helps you to save money and improve your net worth.
Since the budget requires you to plan your finances in advance, you can save money. The budget helps you to control and eliminate wasteful spending, shows ways to increase your savings, and plans how much and where you can invest out of the savings, and by doing so, you’ll see your net worth improve. Budget can help you build that financial life you always imagined.
7. Budgeting helps you find financial contentment
Financial contentment is one of the prime elements of good financial behavior. It stops you from spending money that you don’t have. Every time you sit down to create, assess, or register expenses into your budget, you are making a determined effort to focus on your own finances instead of other people’s finance. After a while, you will lose complete focus on what other people do with their money and focus only on your own money. And, at that time, you will experience what it is like to be financially content.
How to do budgeting?
Step 1: Set Realistic Goals Transparent goals are the targets you should aim for and categorize them into Long term & Short Term.
Step 2: Gather your Financial Papers including bank statements, Credit card bills, utility bills, Past few months receipts, Loan statements, Investment details, and other necessary papers
Step 3: Determine your Income Figure out your available income that is regular.
Step 4: Determine your Expenses Use your bank statements, Credit card statements, checkbook register, store receipts, and more to identify all your spending.
Step 5: Check your Monthly Income and Expenses If Income > Expense, Good to go for investments & If Expense> Income, Need to cut back some expenses
Step 6: Separate Needs and Wants Ask Yourself: Is it Really Important?
Step 7: Design your Budget Your budget should be able to meet your "needs" in the first place, and then the “wants” that you can afford.
Step 8: Play yourself First Save as much as you can and even a small amount makes a big difference.
Step 9: Check back periodically Customize it according to your financial situation, need, and goals.
Answers to FAQ
Q: Does it cost to make a budget?
A: There are many apps that are free and there are some that charge fees. Depending upon what kind of budget you require you can select the free or paid one. You can also use the tool which offers you a free trial to use. If you require a basic budget, then you can use the free apps or even a spreadsheet.
Q: What should I keep in mind before making a budget?
A: Before making a budget, you need to analyze your finance. Ask yourself questions like How much I am earning?
How many expenses do I incur?
How much I am saving?
What are my future goals?
How much extra savings are required to fulfill my future goals?
Q: Do we create a budget just for spends?
A: No. Budget is not just about paying bills and managing your expenses. The budget is also to plan for retirement, plan for the education of your children, for an emergency, for planning investments, and much more.
Q: What if you get stuck to a budget that is not usable anymore?
A: You need to keep a check on your budget periodically. With the changing situation, you need to update the budget.
Q: What if the budget is not helping?
A: If you are budgeting properly then there won’t be an issue. Also, there are side opportunities available by which you can earn extra income in your free time, and this will help in fulfilling your budget goals.
Budgeting is the key to have a successful business, a start-up, or an independent financial living. The best part is you can check predesigned budgets to see what works best for you. You can use the Budgeting app, Budgeting software, Spreadsheets, Google sheet templates, Microsoft budget templates, and even do it manually on a paper. If you don’t want to spend time manually entering numbers in spreadsheets, then you can use a good budgeting app that comes with free or no cost and which will sync all your transactions and can be accessed on multiple devices. Budgeting software may not have an option to access on a phone or tablet.
Some of the Best Budgeting apps are:
Bank Sync- Yes
The best free Budgeting App helps you manage your budget on the go.
You need a budget (YNAB)
Paid (Free Trial Available)
Bank Sync- Yes
For serious budgeters – It gives every penny a job. It is one of the best budgeting application available.
Bank Sync- Yes
For Investors – Help you track your long-term financial goals
Basic version is Free/ Pro version Paid (Free Trial Available)
Bank Sync- Yes
Guard you against spending
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