14-04-2014, 04:06 PM
MATH'S PROJECT- HOME BUDGET
WHAT IS BUDGET?
A budget is a list of all planned expenses and
revenues. It is a plan for saving and spending. A
budget is an important concept in microeconomics,
which uses a budget line to illustrate the trade-offs
between two or more goods. In other terms, a budget is
an organizational plan stated in monetary terms.
In summary, the purpose of budgeting is to:
1.Provide a forecast of revenues and expenditures,
that is, construct a model of how our business might
perform financially if certain strategies, events and
plans are carried out.
2.Enable the actual financial operation of the
business to be measured against the forecast.
TOOLS USED FOR CREATING A PERSONAL
BUDGET
Several tools are helpful for constructing a personal budget. Regardless of the tool used,
a budget's accuracy is only as good as the accuracy of the updated budget data; an old
budget that does not reflect actual income or expenses is of little use to a current budget.
Computer generated budgets have become commonly used as they replace the need to
rewrite and recalculate the budget every time there is a change.
Pencil and paper
A simple budget can be written on a piece of a paper with a pencil, and optionally, a calculator.
Such budgets can be organized in three-ring binders or a file cabinet. Simpler still are the
pre-formatted household budgeting or bookkeeping forms that creates a budget by filling
in the blanks.
Spreadsheet software
Spreadsheet software, including Microsoft Excel, iWork Numbers or OpenOffice.org
Calc, helps to arrange budgets according to need and performs calculations easily with
rudimentary formulas. For example, budget spreadsheets are used to keep track of income
and expenses. The major reason most people discontinue using budget spreadsheets that
don't offer date-shifting is that the information needs to be reentered or moved at the end
of each month. Spreadsheets are still excellent for complex budgets and planning.
FOLLOWING A BUDGET
Once a budget is constructed and the proper amounts are allocated to their
proper categories, the focus for personal budgeting turns to following the budget.
As with allocation, there are various methods available for following a budget.
Envelopes
Envelope Accounting or the is a method of budgeting where on a regular basis (i.e.
monthly, biweekly, etc.) a certain amount of money is set aside for a specific
purpose, or category, in an envelope marked for that purpose. Then anytime you
make a purchase you look in the envelope for the type of purchase being
considered to see if there are sufficient funds to make the purchase. If the money
is there, all is well. Otherwise, you have three options: 1) you do not make the
purchase; 2) you wait until you can allocate more money to that envelope; 3) you
sacrifice another category by moving money from its associated envelope. The flip
side is true as well, if you do not spend everything in the envelope this month then
the next allocation adds to what is already there resulting in more money for the
next month.
With envelope budgeting, the amount of money left to spend in a given category can
be calculated at any time by counting the money in the envelope. Optionally, each
envelope can be marked with the amount due each month (if a bill is known ahead
of time) and the due date for the bill.