Personal Budgeting Process

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The financial personal planning and budgeting process in many respects resembles the process used by business. Before a plan can be made, certain questions need to be addressed such as what the goals of the overall budget are and what time frame the budget should cover. Once goals have been defined and some preliminary data is collected the process of extrapolating the data to estimate what (in the broadest sense) needs to be done to achieve those goals. With goals and timeline in place, the budget is created.
A complete budget, also known as a "comprehensive budget" is a set of financial plans which includes an operating budget (which contains recurring income and expense items), a capital budget (one time or irregular purchases), and sometimes specialty budgets, such as the tax budget. The recurring items which appear in the operating budget are generally referred to as short-term expenses while the …show more content…
Specialized budgets should only be created when the income and expenses for the budget can be measured separately from other financial activity. Summaries of the income and expenses from the specialized budgets then appear as line entries on the operating budget. It is important to note however that while specialty budgets can be used for reporting they are only one component of the total financial picture.
Once a budget has been completed and the period has begun the process of monitoring begins. At the conclusion of the period the budget covers, differences between planned and actual expenses for each category can be measured. In accounting, the differences between a budget and actual expenses are known as variances where overages on expense items and shortages in incomes create negative variances and shortages in expenses and overages in incomes create positive

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