BUDGETING

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BUDGETING

Published by sam - 03/10/07 - 02:10:47 am

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This blog will now discuss about steps in doing budget.

STEP ONE CASH FLOW ANALYSIS

The first step in making a budget for future income and expenditures is to look at how past income and expenditures flowed through your pocketbook. This cash flow analysis—as it is called technically—is not a budget, since it implies no goals and represents no plan. Rather, it is a financial snapshot that tells you how you presently behave. Budgeting or planning will come after a thorough cash flow analysis.

To gather about expenditures, start with informations you already have. Even if you are not particularly well organized, you will have surprisingly good collections of data on hand in the form of canceled checks and credit card receipts. If your checkbook is up to date, if your bills are organized either by functions, alphabetically or by date paid, and if your tax worksheets are kept with your completed returns, the task of organizing for the budget analysis will be much more quickly.

Set up a ledger book, a yellow legal pad, or a computerized spreadsheet, and add up figures for each category into monthly amounts for the previous six-to-twelve-month period.

Income Write down the gross income you receive during each month. If you receive your income weekly, list the total for each month. For income received annually or quarterly, list it in the month you actually receive it. Alternatively, add up your gross income on an annual basis.

If you pay directly into a credit union monthly savings plan, or a qualified deferred-income plan (such as 401(K), include this amount under gross income but deduct it later as an expense a savings payment. If you have income other than a monthly pay check, such as dividends, rents, or interest, be sure to list these as well. Income categories will include the following:

- Salary or wages
- Self-employment income
- Pension, disability, unemployment, or Social Security income
- Interest
- Dividends
- Alimony
- Child Support
- Rents and royalties
- Trust and annuity income
- Cash gifts received
- Net gambling earnings

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October 3, 2007 | Budgeting, Money Management |

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