Excel 4 Ur Business

A budget is one of the most important tools available to you for taking control of your finances. In this chapter you’ll learn what a budget is and why it can be so useful. You’ll also learn how to use the budget template to manage your own money.

What Is a Budget?

Some people say, “I’m on a budget,” and mean nothing more than that they are limiting their expenditures. “I can’t go to dinner at Chez Pierre’s tonight because I’m on a budget.” In that sense, pretty much everyone is on a budget—after all, how many of us can spend money without limitations?

In another sense, a budget is a way to keep precise track of your money, how much comes in and how much goes out, and to determine how much you can and cannot spend on various things. Money that comes in is divided among the various budget categories, such as mortgage or rent, groceries, and entertainment. Each expense is likewise charged against the corresponding category. There are two main advantages to a budget.

One advantage is that after a few months you will have a pretty good idea of where your money is going. Most of us know how much we spend on things such as rent and car payment, but when it comes to less defined expenses, such as clothing and dining out, we are often in the dark—or worse, under a serious misconception. A friend of mine, for example, was flabbergasted when he started a budget and soon learned he was spending almost $300 per month on restaurant meals and take-out food. That was more than twice what he thought he was spending and he soon took corrective measures. He learned some basic cooking skills and now eats at home much more often. The end result is that he now has an extra $150–$200 per month he can put toward more important things, such as saving for a vacation.

Another advantage of a budget is that it takes the guesswork out of some purchase decisions. Without a budget, the question, “Can I afford it?,” is often answered based on guesswork and wishful thinking. With a budget, you’ll know right away. For instance, suppose your sofa is getting rather threadbare and you see a really nice one on sale. A quick look at your budget balance will tell if you have the required amount in your household account. If so, you know that you can go ahead and buy it without any worries. If not, you know you’ll have to wait.

You should not think that a budget is a straightjacket that leaves you with no options or flexibility. We all know that unexpected expenses come up and can’t be avoided, such as car repairs or a dentist’s bill. Or perhaps there’s a sale that’s just too good to pass up. You should expect your budget to change over time as your income and expenses vary. I’ll show you how a budget can be flexible enough to let you deal with such unexpected events.

Budget Fundamentals

The basis of a budget is a set of categories for your expenses, such as entertainment, insurance, and groceries, and your income, such as salary and interest. When money comes in, such as your paycheck, it is divided up among the various categories. Likewise, each and every expense is charged against the appropriate category. Sounds like a lot of work—and it can be. This is why the Excel template that is part of this chapter is such a valuable tool. By taking most of the drudgery out of keeping a budget, the template lets you have the advantages of budgeting without the hassle—or with a lot less hassle, at any rate!

Let’s take a look at the Home Budget Calculator. Then I’ll explain some ways you can use it to help take control of your finances.

 

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