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The word “budget” first emerged in the Middle English word “bowgette,” which refers to a leather bag. The East India Company provided the British Crown with the first budget for India on April 7, 1860. The first Indian budget was submitted on February 18, 1860, by James Wilson. The Indian budget is credited to P.C. Mahalanobis as its founder. The Ministry of Finance’s Budget Division, Department of Economic Affairs, under the direction of the Finance Minister, prepares India’s yearly budget.
The wealth tax and expenditure tax were implemented in 1957, and the voluntary disclosure of the disguised income plan was implemented in 1964–1965. These reforms affected the Indian system. Budgets were also given by Prime Ministers Rajiv Gandhi,Indira Gandhi, and Jawaharlal Nehru, with Rajiv Gandhi introducing the corporate tax in the 1987 budget Manmohan Singh gave a historic budget address in 1991 in which he reflected on his lowly upbringing.
The Office of Management and Budget in the US creates the federal budget, which is then presented to Congress for review. The federal government is permitted to run deficits, unlike the majority of American states, and Congress makes significant modifications to the budget.
The Philippine budget is recognized for its complexity, fusing many strategies into a single framework. The National Expenditure Program is created by the Department of Budget and Management and is reviewed and approved by the Committee on Appropriations of the House of Representatives. The General Appropriations Act is then signed into law by the President after receiving congressional approval. The performance, and zero-based budgeting methods are all included in the Philippine budget system.
Various types of budgets serve different purposes in organizations:
A personal budget, often referred to as a home budget, is a financial plan created to help manage one’s future income by allocating it to different goals, including expenses, savings, and debt repayment. Personal debts</expenses are taken into consideration while creating a budget for yourself. There are several techniques and resources available to help in developing, using, and modifying a personal budget. For instance, income from employment is classified as a source of revenue, but expenses include things like bills and rent.
A departmental budget is a financial forecast for a division, company, or organization. It directs company planning, establishes goals for management, and calls for staff cooperation. Typically, annual or quarterly budgets are created and continually monitored. The stock price of the corporation may be affected by budget variances. Within financial management or FP&A teams, budget analysts are essential to this process.
A detailed plan covering anticipated sources of funding and expenditures is a government budget. The operating budget, the capital budget, and the cash flow budget are the three categories that are frequently included.
This budget, which is focused on daily operations, calls for meticulous budgeting of revenues and related costs. It classifies a number of components, including revenues, wages, benefits, and non-salary expenses.
Requests for large-scale asset purchases, such as real estate,machinery, or IT systems, are included in capital budgets and have a considerable impact on the organization’s cash flow. They serve to set priorities, manage risks associated with decision-making, and allocate resources.
By taking into account the time of payments and cash receipts, cash budgets link the other two budgets. By assessing the need for more capital, the need to raise funds, or the presence of surplus capital, they support successful cash flow management.
Designed for businesses with erratic revenue, high fixed expenditures, or revenue reliant on sunk expenses. Non-profit and non-governmental organizations (NGO) also make use of it.
Assets, liabilities, and shareholders’ equityare all included in a financial budget, which serves as a road map for accomplishing both short- and long-term financial objectives. It focuses on properly and efficiently managing financial resources to improve financial performance and stability.
A flexible budget adjusts expenses depending on activity metrics for variable costs and accommodates fixed costs with variable rates.
Specially created for enterprises that depend largely on their workforce, balancing income and wages.
A marketing budget is a strategy that details the expensesa business will have to pay to market its goods or services. It typically includes all costs related to advertising campaigns and spans a certain time period, ranging from a quarter to a year.
A performance budget concentrates on programs and functions while estimating costs and revenues. It lays out suggested activities to be carried out, defines goals, and raises money.
It determines the number of units needed to reach sales targets and the manufacturing costs, including labor and materials. Usually used by businesses that focus on their products.
It predicts the costs of labor, materials, and related charges for a certain corporate project. Budgets for each project activity are frequently broken down into task budgets.
The revenue budget consists of the government’s revenue receipts, which are generated through various sources such as taxes and duties, and the corresponding expenditures that are financed by these revenues. The revenue budget is influenced by multiple taxing jurisdictions.
A sales budget is a type of financial plan that forecasts a business’s revenue by forecasting how many products will be sold and at what prices. It offers details about the business’ anticipated performance over a certain time frame.
It is rigorous and does not allow adjustments based on institutional activities, and is mostly employed by government and nonprofit organizations based on projected values, which may differ, forecasts revenue and expenses.
Does not allow for the carrying over of goods from the prior year and requires approval for each item added to the budget. Though it takes more time for management evaluation, it is appropriate for the thorough and impartial distributionof scarce resources.
An appropriation budget is a financial strategy that specifies how the money will be distributed for particular initiatives or goals. It serves as guidance for budgetingand spending management.
Creating a budget helps individuals and households manage their finances, achieve goals, and make informed spending decisions. It provides a roadmap for income, expenses, savings, and debt management. Follow these seven steps to create an effective budget and take control of your financial well-being.
Compile all sources of income, including wages, tips, investmentreturns, and government benefits. Consider both regular and irregular revenue.
Spend a month keeping careful track of your spending. Record every expenditure, whether by credit card or cash, to gain a clear understanding of your actual expenses. Remember to include subscriptions, automatic payments, and utility bills.
Determine your financial objectives, such as saving money, eliminating debt, or curbing overspending. Set realistic goals that align with your priorities and adjust them over time as necessary. Start by focusing on urgent goals like paying off debt or building an emergency fund.
Identify mandatory monthly expenses like rent, insurance premiums, taxes, childcare, and phone bills. Subtract these expenses from your total income to determine the amount available for discretionary spending.
If you have outstanding debt determine the minimum payment for each debt whether it’s a student loan or credit card bill deduct these payments from your income to get a clearer picture of your available funds.
Set aside the leftover funds for discretionary spending. This includes pursuing your goals, such as debt repayment or savings, as well as covering groceries, entertainment, transportation, and unexpected costs. Assign each dollar to a specific purpose based on your goals and the insights gained from tracking your spending.
Review your spending and goals every month. Reassess and modify your discretionary spending allocation accordingly. A flexible budget will help you avoid overspending and stay on track with your financial objectives.
Various approaches employed in formulating financial plans include:
This budgeting strategy entails pinpointing the precise corporate operations or activities that contribute to costs. The development of strategies to successfully cut these costs follows. Existing organizations frequently use this strategy.
This strategy involves senior executives developing the financial plan with the help of managers and staff members from many divisions. It employs a bottom-up approach and promotes participation and involvement at all organizationallevels.
This budgeting strategy combines aspects of top-down and bottom-up approaches and incorporates manager and employee cooperation. The aims and objectives established by senior
management are considered account when creating the financialplan.
This conventional approach starts with the prior budgetand modifies it according to projected percentage changes, taking market expansion and inflation into consideration.
In ZBB, each item is evaluated from scratch once all figures have been reset to zero, and the manager justifies each new number with logic. It adopts a deliberate top-down approach and cuts out pointless, typical spending.
Budgeting techniques sound good, but there are other options you may consider if your finances are in a bad way or if you are struggling with rising debt and a lack of money.
Feel empowered to proactively seek bill extensions or payment plans from your creditors. Avoiding or postponing payments will only worsen your debtsituation, and in addition, late fees will negatively impact your credit score.
Examine all your bills to see which ones need payment right away. Make a payment schedule based on your paychecks, making sure to provide adequate time to pay any expenses that are past due. If you have missed payments, get in touch with the billing firms to see if you can make partial payments to clear things up. Do not make promises of complete payment later; instead, be upfront about your current financial status and make a commitment to paying what you can.
While adhering to the traditional 10% savings rule may be difficult when you’re living paycheck to paycheck, it’s critical to put financial stability ahead of saving in these situations. Focus on paying off debt and immediate expenses rather than investing money in savings accounts with low balances.
To regain control of your finances, it’s crucial to understand your spending habits. Utilize online banking and software to categorize your expenses and identify areas where adjustments can be made. Simply reviewing your discretionary expenses as a whole often prompts changes in spending behavior and helps curtail excessive purchases.
It’s time to tighten your budget once you have a clear view of your spending habits. Start by cutting coststhat won’t have a substantial influence on your way of life or altering bad behaviors. For instance, choose to eat more meals at home rather than go out to eat if you frequently buy perishable groceries. By switching insurance providers, you might potentially lower your premiums without sacrificing coverage.
It’s critical to reduce your spending proactively. Do not be afraid to speak with your card issuer and ask for a decrease in the annual percentage rate (APR) if you are burdened by excessive credit card interest rates. Your likelihood of success increases if you have a solid payment history. Your outstanding balance won’t go down as a result of this, but it will stop increasing quickly.
It’s crucial to keep track of your development for several months after putting these strategies into action. You can do this by keeping a budget notebook, using the software suggested in step 4, or using budgeting apps on your phone. The consistency of your tracking is more important than the method you use to keep track of your spending. Organize your expenses into categories to ensure every penny is included. Then, at the end of each month, make any necessary corrections.
Even if saving and investing may not be possible right now, think about strategies to increase your income. To boost your existing income, look at options like working overtime, acquiring a second job, or freelancing. Keep in mind that a budget is a tool you may use to build a better and more prosperous future, not a restricting barrier to your money.
To increase the overall profitability of the business, the board of directors at XYZ Corporation sets a new goal for the marketing team: to sell 10,000 units at a discounted price during the fiscal year. The manufacturing division, however, is unable to produce 10,000 units in the allotted amount of time. The marketingand production divisions may become frequently at odds as a result of this circumstance. This problem may have been avoided if inputs from the production unit had been considered throughout the financial planning process.
Conversely, the sales team would anticipate a pay raise or performance-based bonuses if the marketingteam had successfully met the sales objective. Unfortunately, the planned incentives were not given because of the decreased output volume. As a result, the management could need to increase the amount of money set aside for pay without also increasing income. Organizations must have comprehensive budgets that connect and synchronize several departments for this reason alone.
 Pros |
 Cons |
|---|---|
|
Enhanced planning and oversight
Optimal allocation of resources
Improved teamwork and coordination
Heightened employee motivation
Facilitates forecasting and goal-setting
Streamlines decision-making
Promotes responsibility and ownership
Assists in industry benchmarking
Enhances financial reporting
Drives profitability |
Lack of flexibility Time-intensive Potential for conflicts Setting unrealistic targets Neglecting external factors Imposing rigid constraints Complexity Potential divergence from reality Limitations in suitability Focus on short-term gains. |
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1. What is the Significance of Budgeting?Budgeting offers financial security through budgeting for expenses and the planned use of remaining funds. It encourages , saving, and general financial regulation. People who develop plans and set goals are better able to manage their finances, make wise decisions, and identify risks and opportunities.
2.How Can People Reach their Financial Goals Using the "50-30-20 Rule"?
The “50-30-20 rule”, a personal financial aphorism, suggests dividing your money into three main categories. 50% should be set aside for the basics, including food, shelter, and medical attention. Budget 30% of your income on indulgences like entertainment and high-end food. Setting aside 20% of your salary for savings, investments, and debt repayment will help you stay on track for long-term goals and emergency funds. Remember that this recommendation may need to be modified depending on the circumstances. Generally speaking, balancing necessities, wants, and financial security is helpful.
3.What are the most Frequently Encountered Budgeting Errors?Budgeting mistakes, such as leaving no room for error or being excessively rigorous, can lead to frustration and budget abandonment. Other common mistakes involve ignoring expense tracking, lacking an emergency fund, and failing to regularly evaluate and revise the budget.
4.What are the Risks Involved in the Budgeting Process?Risks associated with the budgeting process include operational, political, financial, and human risks. The influence of these risk variables on the content and methodology of budgeting results in the labeling of budget items as “riskmodeled”, “risk considered”, or “risk excluded”.
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