Personal Finance Budget – Why bother building one?
A personal finance budget is a financial planning tool that helps you to plan your income and expenses and forecast the end results (your SMART objectives as you’ll see in the following articles). It not only graphs incoming money and outgoing money but also notes down the path of expenditure.
An Income and Expense statement is nothing but a statement which gives you a complete picture about all your actual income and expense. It also shows you, how much on average you are spending on various things every month.
Comparing your personal finance budget with your income and expenses statement
Basically a Personal Finance Budget presents a broader meaning and purpose as compared to an Income and Expenses Statement. These are some benefits of comparing them:
1. You can control if you’re forecasting your expenses and income reasonably
In fact, this can be easily tracked by comparing these statements and analyzing whether they are going according to your forecast or not. Many times, it happens that some expenses go above what you actually planned for them.
By studying your Income and Expenses Statement and Budget for a period of time (say 6 or 9 months), you can easily figure out the rate of increase or decrease in your income and expenditures, based upon which you can further analyze reasons for it.
This will help you to allocate funds accordingly or curtail some expenses too.
Would you like to know where your money is going every month? Compare these statements and you’ll find the answer.
2. You can track your progress towards your goals and dreams
Compare your budget with your income and expenses statement gives you a bigger picture about your current progress towards achieving your goals.
Based on your comparisons you can decide to allocate funds for your future expenses and repayment of current as well as past debts (if any).
No matter how good you plan, there is always a possibility of facing unexpected expenditures. A budget can assist you in this regard by helping you to plan savings.
As you’ve seen these tools when compared bring you valuable information to make better decisions for you and your family. Give them a chance and you’ll see the benefits soon.
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