Role of Budgeting in Planning, Control, and Resource Allocation Process in UAE Companies

Budget
Before understanding the key concepts of budgeting, it is important to understand the meaning of budget. A budget is used to make a documentation of the translation of plans into money. So, the amount of money that needs to be spent in the planned strategies of the company would lie under the budget of that company. These planned strategies include the expenditure that a company incurs and also the income that the company predicts to make. So, in other words, a budget helps one to make an estimation of the amount of money that would be required for the company to handle the projects undertaken by it. It must also be understood that a budget is not made permanently. There are conditions under which a company can make changes in the budget and go as per as the needs of the market. As for example, if a company sees that the use of computers is not as had been planned in the budgeting; it would either replace it with something or not make any investment at all in the field. This is where the utility of controlling comes into the picture. Other than this a budget is also significant from other perspectives. If one talks about the resource allocation, budget has an equally important role to play in it. The reason for the same is that let's say that a company has budgeted that it can afford a certain amount of power supply for a certain project that is conducted in a village. Under the conditions, the amount of human resource that would be required to carry out the project can be determined from the budget itself. Normally a budget is of three types. They have been mentioned as follows:

Survival Budget: This form of budgeting is important in the boundary conditions. It estimates the minimum resources so as to complete a particular project. So, if a company has a look at the survival project, there is one obvious analysis that can be done. This is that under the most optimistic of the situations, the resources allocated would be sufficient. There would be very little margin of error under the conditions.

Guaranteed Budget: This budget is formulated when there is a guarantee of a particular amount of income at the time of formulation of budget. So, when a budget is made from this perspective, this income is taken into consideration. If somehow, the debtors are not able to provide the income that the company used as guarantee before making the budget, it would have to switch over to the survival budget formation.

Optimal Budget: The third form of budget is the optimal budget. This budget is used under the conditions when there is extra money in the company accounts or else the company feels that it could raise extra money from the market. So, if the position of the company is good then this form of budgeting can be applied. As for example if we consider a very famous company in the infrastructure sector, Emaar, we would find that the company has the ability to raise a lot of extra capital from the market. So, Emaar can hope to use it in utilizing the money to plan a few more interesting projects like it had made the longest mall in the world and the tallest tower in the world. Both these projects were outcomes of an optimal budget made by the company.

Budgeting Responsibilities
Owing to the circumstances under which a budget is fruitful, the organizations should be highly selective in handing over the responsibilities of making the budget. There are a few pre-requisites of making a budget. They are as follows:

The concerned employee should have a clear understanding of the company's values, strategies, and plans that lie in the near future.
The employees must know the importance of cost-efficiency and cost-effectiveness.
Also, the concerned employee must have knowledge about the resources that would be used to generate and raise funds.
The above pre-requisites are essential for the company if they have the motive of using budgeting in the planning, controlling and resource allocation purposes.

So, it is generally recommended that a company has a budgeting team that has an optimal size so as to prevent any discrepancy with the formation of the budget. Under all situations where the concerned members of the finance department have difficulties in planning the budget, they would have to consult the board of members for the same. For a situation like this to arise, the planning in the company must certainly have been wrong. So, we can see that the new planning would depend solely on the fact that budget allows the same to happen. Under all other conditions, the estimated plan would have to change. (Budgeting, 2010)

Role of Budgeting in Planning
Here we are taking the telecommunication giant, DU into account to understand the role played by budgeting in the planning process. It was only about a couple of years ago that the company introduced its new plan. This new plan was about introducing the pay-by-the second plan amongst the services of the company. This was done as per as the optimal budget plan of the company. DU had formulated a budget where it got the option of introducing a new facility with the extra money that it hand in hand. As the company analysis shows that DU was climbing the ladders of success even then, so this was certainly a major step in the making. Moreover, the funds that had been allocated in the budget were enough for the fact that the company could start this service any time it wanted. So, it chose the time when the nearest rival company Etisalat had screwed up its plans after introducing the Blackberry services. As an optimal budget is that which allows the time for starting a new investment, this was just the time and DU made the most of the opportunity. Today this plan is among the most revenue-fetching plans that the company had ever introduced in its services. So, budget played an extremely important role in the planning of this success of the firm. Had the company planned to use the extra money as a surplus or retained or reserve, it would never have been able to introduce this service. So, one can see the importance of making the right budget at the right time can help in planning for great successes in a company. There are other examples also where one can see the planning being aided by preparation of budget. The tourism department of Abu Dhabi was guaranteed of the fact that it would have a considerable amount of income from the flourishing tourism in the country due to the onset of some of the most peculiar activities in the country. Under the situation, the department used the guaranteed budget to enhance the cultural activities of the country. A number of museums have been renovated because of a planned budgeting under the guaranteed budget plan. The department had planned that with the money they would have from the already existing resources in tourism, it would evoke a cultural feeling in the country and its natives, It has been able to do it successfully as per as the statistics of the museums of the region are concerned. So, once again we see that budgeting has helped in planning of such an important landmark in the country.

As in general one can say that budgeting is about aiding a company to make plans for the future. It is that process where a company can be assured of the fact that it would have enough money so as to carry out the requisite projects. We are all acquainted with the fact that the world is about competition as of today. Every company needs to plan new projects so as to show its core competency. Under the conditions, no company can automatically start investing on its research and development. It has to come through a substantial degree of planning which could only be possible after the budget of the company allows it to do so. In all other situations it would finally have to terminate the services with an excess of demand or supply.

There are also other instances where a company can use the principles of budgeting in order to carry out its planning. This can be seen in the case of training. Every planning of training has to be supported by budget. This is one of the foremost criteria of training. There are a number of instances in the country where the Government is implementing programs like Emiritzation. If the budget of the company does not support such plans they would certainly not be executed. The loss can be huge under the conditions. The first case would be a monetary loss as an incomplete training would actually be of no used as it would be insufficient to fulfill the company's criteria. If some small companies do place employees with an incomplete bit of training, it would make the company even smaller!
So, we can see how budgeting governs this chain of planning which of not executed in a suitable manner could bring about adverse results. (The Importance of Budgeting, 2010)

Role of Budgeting in Controlling
As in the case of planning, budgeting also has a special role to play in controlling of an organization. We have seen that a plan would simply lay the conditions of taking on a particular activity. What follows is its controlling in the implementation phase. Let's say that a company wishes to promote its products or services in the trade fare of Dubai. This is one of the places where controlling comes into play with respect to budgeting. Dubai Trade Fare is one of those occasions when a number of companies use the best of means to promote their products. With an adequate amount of control, the companies would never be able to compete in the pool of so many. So, a budgeting has to be done to choose the HR and marketing department which would be responsible to control the scenario.

Without a proper budgeting in this respect, the company would make inefficient decisions and after a while, there would be no control over the promotional measures of the company.

There are also a number of chances where a company goes with leisure expenses. It does increase the value of the company for a particular period of time but after a while there has to be an end to it. Now, with a planned budget under the conditions, the companies would be able to restrict themselves from over-spending as the budget would not suit their expenditure. This requires the company to make a survival budget. As we can see a survival budget would certainly take care of the budgeting requirements of the company. If the employees are aware of the fact that they would not be able to complete their respective projects with the type of expenditure they are doing, they would certainly shift to other economic reasons. This way a company can also control the activities of the employees. Once a planned budget is produced the whereabouts of the employees can also be checked as they would be on a hire. The amount of time given to them in the budget would be fixed. If they are unable to finish their respective works in this stipulated time they would see the effect on their salaries or wages. So, this way, the company's activities, employees, time and money can all be under control with the introduction of budget in the company's financial plan. The company would certainly become more efficient if it works in a controlled manner. So, this would be for the mutual benefit of both the employees and the company as well. (Controlling a Budget, 2010)

Role of Budgeting in Resource Allocation
A company's success is highly dependent on the resource allocation. This has to be done optimally so as to complete a certain project. The law of economics suggests that a company has the least resources and has to make the most of it. So, only an appropriate resource allocation would help this happen. This would be in terms of human resource, raw materials, equipments, money, time and all other attributes that take for making a project successful. Here again, the budgeting of the company plays an important role to play. The reason for the same is that in all the sectors that have been talked about here, only a planned budget could decide the maximum a company can afford. Let's say that ADNOC has the plan of staring a new subsidiary. Under the conditions, it would have to make a budget where the company could allocate the amount of human resources in order to make this happen. Not only this, there are a series of activities that would have to be done in the process. Much of the time, there would be two processes going on and at times even one. So, a planned budget would estimate the amount of money that the company can afford throughout the process. Based on this, the processes would have to be allocated in a manner where the company can make the best use of the human resource available. If ADNOC has 200,000 AED for the purpose, and there are 10 slots, rather than allocating 20,000 AED per slot, the company would have to see the priorities of each slot. If a particular slot requires double the number of processes than the others, the resources would have to be allocated accordingly for the same. Now this can only be possible with an appropriate amount of budgeting. If the budget of the company does not allow double resource allocation for a particular slot because of other activities, then the company would have to come up with other alternatives. Had there been an inability of a budget, the company would allocate double resources and finally land up with none available for a process that has little requirement. So, we can see that even the process of resource allocation requires budgeting to a large degree.

Talking about the company Emaar, as per as the organizational size of the company, there has to be a proper budgeting done. The reason for the same is that every department requires an adequate amount of human resource and funds. If the company's budget for a particular project is 200 million AED, the company would also have this budget divided into different departments. Every department would have to use only the allocated funds to support its human resource and all other requisites prior to conducting the project. If the construction department spends so much that the company is not able to use any funds for its advertisement, in this world of competition, even a company like Emaar would have to bow down to others in the league. There are so many options that people have for residents that promotion under forced conditions could change every profitability ratio of Emaar. So, here again we see the hierarchy that could be affected because of the inappropriate use of resources that would result from the non-availability of a budget that could suit the purpose. (The Basic Budgeting Problem, 2010)

Conclusion
So, one can see that a budgeting process has a number of utilities in the projects of a company. This could be from the perspective of planning, controlling or resource allocation. Every company has the desire to be at the top. Finance has a special role to play in the same. Te steps of laying down an appropriate budget are as follows:

Firstly, the concerned person should lay down all the places of investment with respect to a particular project.
Next, make an estimation of the unit cost of every product that would be manufactured in the process.
Next, analyze the resources that would be sufficient to provide for the unit costs found.
Next make a proper budget format so that it is clear to all the departments and they the amount of allocation for them in all the respects.
It is also advisable to make notes so as to be able to explain the budget better.
Next, it is required to take a feedback on the budget so as to see whether it is applicable to all the departments or not. If not, then it would have to be re-planned.
Finally, make the final documentation so as to be able to help in planning, controlling and resource allocation as has been suggested earlier.

With all the above processes followed, a company can afford to perform all the financial activities in its respective projects. It must be remembered that only a systematic design of budget as has been concluded could be used for the mentioned cause.

I am a pre final year student at the Indian Institute of Information Technology and Management, Gwalior, India pursuing a five year integrated course (dual degree) leading to the award of B.Tech (Information Technology) and MBA. I am currently in the 9th Semester. ABV-IIITM Gwalior, a Deemed University, is an apex Institute, established by the ministry of HRD (Human Resource Development), Government of India.

The competitive environment at my Institute coupled with my inherent trait of trying to learn something new from each experience has made me come a long way in these four years. I have not only learnt to work under pressure and intense competition with some of the brightest students in the country but have also worked with an esteemed KPO called CBI Solutions in the meanwhile. This has given me the experience to get exposed to some of the most challenging marketing traits in the business. Moreover, I have been awarded first rank for IT and Entrepreneurship at the end of my 7th Semester.

I have been privileged to work at Polaris Retail Infotech Limited, Gurgaon from May to July'08. This taught me the practical application of relationship marketing as I saw the preparation of customer interfaces through their software Smart Store. This is visible at billing counters at retail stores of the fame of Shopper's Stop. Also, I've been in the editorial board of my college magazine, La Vista for the past 3 years and eventually I hold the responsibility of the Chief Editor.

Revolutionizing Excel Budgeting

A survey related to Excel Budgeting conducted by Adaptive Planning in Nov 2006 revealed that 78% of the respondents use spreadsheets as their company primary budgeting and forecasting tool. This phenomenon is not limited to only small and medium companies. It's noted that amongst the large companies, 68% rely primarily upon spreadsheets as their budgeting and forecasting tool.

Despite the number of limitations in using Excel as a budgeting tool and the availability of Business Performance Management Systems (BPMs) in the market, the host of benefits offered by Excel in budgeting continued to be unrivalled. BPMs overcome some of the limitations of Excel but eroded the advantages at the same time. Hence, many budget managers choose to overlook the Excel limitations (such as cell links across workbooks) and enjoy the benefits of using Excel as a budgeting tool.

As previous budget managers, we have gone through the same pains and could understand and identify the needs and wishes of every budget manager who are using Excel as a budgeting tool and looking for solutions to undermine its limitations. We have concertedly diverted some of our resources from our key activities to research and work on fulfilling those unmet needs. And today, we are excited to see the results -- a breakthrough in removing each of those Excel limitations while preserving all the benefits of the current excel budgeting method. In other words, we have a revolutionary solution that enhances the existing way of Excel budgeting!

THE 3 BREAKTHROUGHS AND 8 BENEFITS IN OUR EXCEL BUDGETING APPROACH

Breakthrough # 1:

JUST by using formulas, we are able to align the headers and sub-headers to the budget numbers. This means that each set/line of the budget numbers has its own classification, be it the header, sub header, product categories, etc. Unlike linked cells where we have to manually specify the description we have to point, our formulas are intelligent enough to detect which header and sub-header each budget line belongs to.

Benefit #1:This means that every budget manager has total control over the layout of the template. Budget managers can easily customise the template to their organisation needs.

Benefits #2:Budget users can re-arrange the row layout of the budget items and budget managers can still easily capture the inputs into their consolidated worksheet. All they have to do is to populate the formula in the first row to the remaining rows in the template and the headers & sub-headers are re-aligned to the new layout.

Benefits #3:Budget users no longer have to keep separate worksheets for their own workings and for submission.

Breakthrough # 2:

JUST by using formulas and not cell links, the details in the template can be easily transferred to another worksheet. Updates to the numbers usually take less than one minute.

Benefits #4:Budget managers and users can make use of the database to create pivot tables and perform analysis on their budgeted numbers. With pivot tables, budget managers and users can analyse the numbers from more than one perspective (e.g. by distribution channels followed by product groups or vice versa).

Breakthrough #3:

We can consolidate the numbers provided by each budget users (e.g. business units, departments, countries) into a worksheet using a relative unknown function which existed even in older versions of Excel such as Office 2000. It is not a macro and yet it has the power to automatically update the budget numbers when the consolidated workbook is opened (Note: Only one worksheet is needed to perform the consolidation).

Benefits #5:
The details from the respective departments, business units or countries are not lost during consolidation.

Benefits #6:
We could still use pivot table to analyse the consolidated budget numbers and do detailed comparison of the budget numbers provided.

Benefits #7:
Reporting and presenting of the budget numbers becomes a breeze when you use pivot table as the source. It does not matter anymore which row the set of budget numbers is located. The row location can even change over time and the set of budget numbers you want will always be presented in the report or chart. This feature is available only in Office 2002 and above.

Benefits #8:
Budget managers can create each chart within a minute. And these charts can be set up such that they can be updated automatically upon opening or at regular interval. New data will be added automatically and old records are deleted when it detects that the record has been removed from the source.

Conclusion

This Revolutionary Breakthrough in Excel Budgeting is able to achieve a whopping time saving of up to 70% in the current Excel budgeting method. A lot more time can be freed up to perform analysis on the budgeted numbers and produce better quality results which otherwise could not be done due to time constraints.

How to Make a Budget

What is the best way to start a budget? The first thing to do when starting to make a budget is to compare their income versus their expenses. The good thing is that it is quite easy to do.

It's too bad most of us never learned this in school and had to figure it out on our own - so here is the lesson that we should have been taught in 3rd grade:

If Expenses > Income = Bad, but if Expenses < Income = Good

And honestly, as simple as it sounds, that is the key to wealth. Anyone, and I mean anyone, who IS wealthy (I emphasize IS because I am not talking about people who appear to be wealthy, but who are actually in debt up to their eyeballs) spends LESS money than they earn.

The great news about this is that anyone can do this - no matter what their income level. If you can do it on a small income, then you can do it on a large income. If you can not do it on a small income, then you will not be able to do it on a large one either. Trust me!

If you really don't believe me, just ask all of the lottery winners who went bankrupt within years of winning millions of dollars.

Regardless of how your expenses and income compare right now - get excited, because you can easily change it!! If it is bad you can make it so much better!! If it is good, you can still make it even better!! I will show you how later, but for now...

How to make a budget

If you calculate your monthly expenses and income and your expenses are less than your income, then you are a rare breed who is in great shape, so just sit tight for a minute.

For everyone else, whose expenses exceeded your income - you are not alone. You actually have a lot of company. The problem is that it is not good company to be in! Most of the U.S has way too much household debt!

So, if your income is $900 and your expenses are $1000, that means you spend an extra $100 each month that YOU DO NOT HAVE!! What your job is now is to find out what you can get rid of or quit buying each month to save that $100. I know, I know - this is the part that hurts. Just like pruning a bush - cutting back hurts, but ultimately you are going to yield so MUCH more fruit because of it!

The goal here is to get your expenses and income to AT LEAST be equal. Once that is accomplished we can work on eliminating wasteful spending or cut other costs to bring the expenses below the income.

Now that you have calculated what your monthly income and expenses are we can start designing our budget. We will first discuss the less effective, but easier method for budgeting

The world's easiest budget

There are 2 simple rules to do a simple budget:

1. You can not spend more money than you earn - carrying a balance on a credit card is not allowed.


2. Money must go to the budgeted categories as soon you get your paycheck.

The way it works:
Rather than having 10-20 different categories of items to be budgeted for you only focus on the 1-3 most important ones and let the rest of the chips fall where they will.

So, to do this you take your paycheck of say $900 and right off the top you put the money to your main priorities. For many people this is tithing to their church, retirement savings, and college savings for children, etc...

A sample of this would be:

$900 (paycheck)

-$100 (tithe)

-$100 (retirement savings)

= $700 (for the rest of the bills and everything else)

It is extremely important that the money gets taken out FIRST for these few budgeted items. If not, I can guarantee that the full amount will not make it as intended.

I highly recommend making this process automatic by using direct deposit from your paycheck or some other form of automatic withdrawal. There is just something about human nature that has a hard time staying consistent with things like this.

Why do you think the U.S. government takes our taxes directly out of our paycheck, rather than coming to collect the full sum at the end of the year? It is the same principle - use it to your advantage.

Easy budget, but not very efficient

I think this budget is perfect for people who don't want to budget. It is simple, does not require too much time, and will help you reach some savings goals. That said, it is still inefficient and leaves the door wide open for inefficient and foolish spending. And we all know where foolish spending takes us - deeper into debt

I think it should be considered the "lazy man's" budget - and you are not LAZY, you are willing to work to get your finances in order!! I know this because you are still reading this article. So, since you are NOT lazy and are hungry for more of a challenge, let's look at how the pros budget.

The money saving budgeting method

Yes, this method takes a little bit more time and energy, but it also will provide you will long-term financial benefits if followed.

To do this we are just going to expand on the "lazy man's" budget mentioned above. Rather than having just 1-3 categories of items budgeted for, we are going to create as many as we need to put a limit on our spending in all areas.

You can use the mentioned budget spreadsheet as a guide for tracking your progress. Try to account for every possible expense that you could run into. You will never be able to budget for every possible scenario, but the goal is to minimize surprise expenses. Inevitably, there will still be surprises from time to time - so I suggest creating a category for these surprises (or you can just use your emergency fund).

How to stick with your budget and make it fun!

The almost sure-fire way to make a budget that fails is to NOT budget for any fun stuff. Budgeting should be fun and actually fun is a necessary ingredient for success. You need to budget for clothing, entertainment, going out to dinner, or whatever else it is you love to do! The key is to do it in moderation and to set limits and abide by them.

The amazing thing is that by budgeting for fun stuff, it actually liberates you to spend money on these items. When you have money budgeted each month to buy clothes, the money is now sitting there waiting to be used for that assigned purpose. Suddenly you can go clothes shopping without feeling guilty!

This is how budgeting truly becomes fun. It is a great feeling when you have money sitting in the bank waiting to be spent. Or, even better: if you start budgeting for vacation and after a little while you have hundreds of dollars just begging to be spent on a vacation!! You go on your trip and come back home and don't owe any money to any credit card companies. Now that is how a budget becomes fun!

Successful Elements to a Family's Home Budget Or Budget Spreadsheet

The internet is a saturated jungle of home budget software ranging from the simple, to the very complex in functionally. To successfully navigate this maze of advertising mayhem, and walk away with the correct Home budget software or budget spreadsheet; you will need to carry with you, in the background of your mind as your search, those critical key elements that are vital in making your family's home budgeting dreams come true! Key elements such as user-friendly interfaces, text and graphics with useful information, and useful supplemental add-ons.

The role of advertising!

P. T. Barnum, and American circus entertainer once said, "There's a sucker born every minute". Thou I, being part of the populace, and with mild embarrassment, would have had Barnum at that time in history spoken, "If given the right ploy, anyone can become a sucker!" In the days of Barnum, just as it is in today's world, advertising's ultimate goal is to turn, even the mildest curiosity, into a successful sale. And to that end, you the consumer is faced with barrage of advertising strategies, all geared for one thing. To remove from your wallet, as much money as possible.

Key elements in household budgeting & the consumer's responsibility!

Element one - Your budget spreadsheet or home budget software should have a user-friendly interface. It should be flexibly and easy to understand in its operation. You should not need a degree in programming in order to use or understand it. Likewise, its working environment should be designed with you, the consumer in mind. You should not have to struggle to navigate from one section of your home budget to another. The screen's layout should be easy to understand. Some programmers believe that more is better; and so to that end they have fatten up ever screen with excessive graphics and/or text that contains little or no useful information. Your home budget software will become an integrate part of the lives of your family. The using of it should not stress you out! If you want stress... have children!

Element two - Your budget spreadsheet or home budget software should provide you with useful information. It should be noted here that the function of a home budget is NOT just to formulate reports on monthly transactions. The function of a home budget is NOT Just to record income and expenses as they occur. Your family is not JUST about living or existing! What about dept management? What about your short and long term goals in life? Part of the totality of any home budget software is to deal with all of these issues. For, it is all of these issues that impact the way you live and the dreams you have about your future.

Your home budget software should aid you in the reaching your short and long term goals in life. If it does not, than you should not be using it. Likewise, your home budget software should provide you with useful information about your future projected bank balances. Elements that contain Information such as daily bank balances, your lowest weekly bank balance, and bank balance trends over time (charts). If you are going to budget out your expenses, then those projected expenses will (over time) affect your bank balance. These elements are paramount to any successful home budget. Without their implementation, your financial lifestyle will revolve somewhere between banquettes and begging! Your budget spreadsheet or home budget software should also provide a means of correcting deviations between projected and actual income and expenses. Unless you plan to record every little expense, then expect deviations between your project bank balance and your actual bank balance.

Element Three - Your budget spreadsheet or home budget software should provide you with useful secondary supplemental add-ons. Everybody loves the pop-up calendar and calculator; but what do they offer that you do not already have on your computer? Let us examine four types of add-ons that not only offer useful information, but also aid in the reaching of short and long term goals. They are savings, credit cards, charts, and Christmas.

Savings- If you are planning to go beyond a stagnant type of life style, then you will have to integrate into your financial picture some type of savings program. For it is savings over time that allow for the achievement of many short or long term goals (L.T.G.'s). This one particular element should be built into your home budget and allow for savings, all from one bank account.

Credit Cards- Even thou I am not a great advocate of credit cards, they do (if used correctly) allow a family to establish over time, a good credit history. In addition, in times of calamity, credit cards are a quick avenue of cash! When looking for a budget spreadsheet, look for a home budget that allows for the use and management of a least one credit card. In addition, your home budget should also give you the ability to swap out any projected budgeted transactions, for a credit card transaction.

Charts - One of the greatest advancements in computer technology as been the processor speed. Today it possible to chart just about any information; but that is not the same as saying that all charted information is of value to you, the user. When considering a budget spreadsheet or home budget software, ask yourself, "Will the charts provide useful information necessary for me in achieving my short and long term goals in life?" "If I stay on budget, will my bank balance fluctuate either up or down?" "Does my projected budget TRULY reflect by lifestyle?" These are important questions; and the answers will guide you in choosing the best home budget for you and your family.

Christmas - At first glance, one might not consider a section that deals with Christmas as being a useful secondary supplemental add-on. Yet, you might feel differently if you have to deal with items bought and then placed on lay-a-way, the correlation of expected income against actual purchases, and the keeping of a list of who gets what. A home budget software or budgeting spreadsheets that offer a section that deals with Christmas, can aid to making that time of year stress free.

So, let us pull it all together!

Putting aside all of the glossy advertising gimmicks, the flashy website "calls to action", and the animated icons; sooner or later you will have to actually use your home budgeting software. Understanding role of key elements and the philosophy of budgeting (L.T.G.'s) will help you in having a successful home budget. Remember, your budgeting spreadsheet is not so much about the crunching of numbers, as it is about the helping you to bring into reality, the dreams of your life! So, as you face the jungle of home budgeting software, keep in mind the elements necessary to making your dreams come true!

My name is Michael Reichwein and I would like to invite you to come and visit our home budgeting spreadsheet website at http://www.bottomlinebudget.com today. You will be able to see the solutions that we have implemented in our budgeting spreadsheets that have aiding families in making their home budgeting dreams come true! Take the challenge! Come, use our free download, and see if you can start building your dreams today!

I am Michael Reichwein, the CEO of Bottomline Budget. My wife and I have called Pennsylvania, USA our home for more then 30 years to date. We originally, did not intend in selling our "family home budget spreadsheets", as a web based business. However, as time advanced as it usually does, it became unavoidable. The funny part was that I did not venture out into the internet looking for software and spreadsheets advocated by other authors in order to gleam as it were, the elements they had gleamed from others. Instead, my concept was in building the spreadsheets around the needs of our family at that particular time in history; and then placing those derived elements into an easy to use format. I am sure that if you use them, you find them as useful as my family has over the last Eight years!

Budgets and Implementations of Business Strategy - Resource Availability

For the sake of simplifying this article, strategy and planning will be used to mean the same thing. Budgets and objectives are related and so is the implementation of business strategy. The implementation of a business strategy is considered as the final stage in business strategy (before monitoring and control). It could be defined as the translation of strategy into organisational action through organisational structure and design, resources planning and the management of strategic change.'' Analyzing the definition, it becomes obvious that strategy implementation of a business strategy would therefore, be how well the various components in carrying it out are successfully integrated.

The organisational structure and design aspect of the definition has to do with how the human resources in the organization are utilised, mobilised and organised to be encountered through the usage of the organisation; and design aspect is that most employers can leave the firm if they are not motivated or given the right position to operate in the organisation in other words underutilised.

The next aspect in the implementation of a business strategy - resources planning-sets out what resources need to be created and which disposed of. It deals with the identification of resources needed, how those resources will be deployed and controlled to create the competences needed to implement the strategies successfully. This resources configuration is dependent on protecting unique resources i.e. where a strategy depends on the uniqueness of a particular resources such as legal means, fitting resources together (i.e. mix resources to create competence) business process re-engineering (i.e. to create a dynamic improvement in performance) and exploiting experience by learning and improving continuously to improve competence. One of the many problems is the conflict arising amongst departments on the allocation of funds especially where money is involved in the implementation of the business strategy.

Management of strategic change is the next component in the implementation stage. This change involves incremental change that merely builds on skills, routines and beliefs of the organization so that change is efficient, and transformational change, which requires the organisation to change its paradigm over time.

In constructing a strategic management system, the budgeting process must be linked with the business strategy. In commencing the budgeting process therefore, budget targets and organizational goals are set up for the next budgeting period by the budget directors, whose main task is to produce a master budget that combines business units and functional period budgets. From period budgets, the budget director constructs the master budget. This is then adjusted to calculate the forecasted shareholder value, which in turn acts as a test on the corporate strategy. This is the point where strategic analysis can be verified. If the strategic blueprints do not create shareholder value, they are taken through strategy modification cycle. Once the master budget and therefore, the strategic blue prints are through, the budget is set to be used and strategy to be implemented.

Acquiring a sufficient budget is one of the main requirements for efficient business strategy implementation. The question is where does budget and business strategy implementation interact?

There is evidence of numerous spates of failures of business strategies implementations and plans in spite of reasonable analyses. Someone has said that good planning can greatly reduce the risks in business failure.

A plan is a projection of future activity. It is normally translated into budget if quantified. Thus, for a forthcoming time period in which the budget relates expressed in money terms. It is defined as a financial or quantitative statement, prepared prior to a specified accounting period, containing the plans and policies to be pursued during that period.

Generally, budgets are prepared procedurally and systematically usually followed by most organisations (although the procedures might differ depending on the size, type and leadership style of the organisations) are as follows:

Communication of details: Those responsible for preparing the budget must be made aware and kept informed of the company's strategic plans (plans or objectives) so that the budget is tailored accordingly. This means that long-term plans of the organisation must be taken into account in drawing the budget.

Principal budget factor that limits an organisation's performance. It is usually sales demand. If an organisation cannot make and sell, more of its products because consumers do not accept that price it restricts the company's demand. Management may, not know the limiting factor, say, machine capacity, distribution and selling resources, until a budget, draft has been prepared. This is the starting point in budget preparation. Once this factor is determined, the rest of the budget is set to be drawn.

Sales budget preparation: Usually this is the base or primary budget prepared based on sales forecasts and from which most of the other budgets emanate because it has been established that the principal budget factor for most organisation.This leads to initial preparation of budgets for the following: finished good stock, production, resources for production, overhead cost, raw materials (stock), raw materials (purchase)

It is when all the budgets are in complete consonance and with one another that they are summarised into the master budget made up of budgeted profit and loss account, budgeted Balance sheet and cash budget.

Cash budget is one of the most important planning tools that any organisation can use. Its usefulness is felt when it shows that there are insufficient cash resource to finance planned operations. Cash budget can show four positions or scenarios giving management an indication of potential problems that might arise so that management can avoid such problems.

The implication of the position is one of the areas where the budget interacts with the implementation of the business strategy. For example when the cash budget shows a position of short-term surplus, management are prompted to either make short-term investments, pay creditors early to obtain discount or increase sales by increasing debtors and stocks, on short term deficit, the appropriate action to be taken by management include increase creditors, reduce debtors and arrange overdrafts to fund the deficit. The other cash position-long term surplus is tackled by making long-term investments, expand organically or by acquisitions or diversify among others; and long-term deficit could be handled by raising long-term finance or disinvestment opportunities.

Budgets and objectives (strategies) are clearly allocated to those areas and activities in the organization, which are seen as priorities. If important objects are to be achieved, and priority strategies implemented, resources must be provided.

However, research in inter-organisational settings identifies resource acquisition (i.e. budget), cooperative interaction acquisition and organisational power acquisition as the difficult part of implementation processes. Thus, inter-organisational fights for larger budgets also influence budget planning and affect strategy implementation. For example, where resources are limited and finite, strategic opportunities may be constrained. Since budget planning is usually annual, budgets are frequently bound to be different from the current situational needs, especially towards the latter part of the budget period. Because of this, flexed budgets are designed to allow for changes in the level of activity, which might result from adaptive changes in functional and competitive strategies.

It must also be noted here that while the role for today's financial managers is quickly moving upstream in the strategic plane, the challenge becomes even grater in light of the accelerating pace of change. This reality is rendering obsolete the traditional approaches to corporate governance, such as 3-5 years static annual planning and static budgets. To provide useful financial insight, sooner rather than later managers need to think about business strategy as a process of continuous course correcting more like a series of real options than a single projected cash flow statement.

The implementation of a business strategy could be likened to a human body without a soul (budget). If there is no soul in a body, it is deemed dead; in the same vein budget is that soul (especially when implementing a new business strategy) for the implementation of a business strategy; thus, the two are linked and interdependent.

Erase Debt - 5 Ways to Wreck Your Budget

It has been said by many financial experts that the best way to erase debt and stay out of debt is to create a budget. Many people have created budgets. Not all work. Here are 5 Ways to Wreck Your Budget if you don't do things right.

1. You Don't Have a Budget

This may seem overly simplistic but not having a budget is the number one way to wreck your budget. You may ask, "how can I wreck a budget I don't have?" A budget is basically an accounting of your income (your money coming in) versus your spending (your money going out). The truth is even if you do not have a formalized budget written down every month, your spending habits have created an "unwritten" budget that is probably ruining your personal finances. Spending without giving it much thought will lead to over-spending and effectively living beyond your means. Every one of us has a set number of dollars coming in and money they spend going out. That is your budget. Whether it is written down or not, it exists. So if you do not have a formalized budget now is the time to create one. Sit down, write it down, and account for every penny coming in and going out.

2. You Don't Have a Realistic Budget

So what is a realistic budget? A realistic budget is one that accounts for the real income you make and the real purchases you make. Let's start with income. Your income may be $5000 per month gross. But that is not the dollar amount you put down in the income box on your spreadsheet. You need to take into account things like taxes and insurance that come out of that gross income. What your want to write down in the income box of your budget sheet is your net income. Income after taxes, insurance, liens, etc. are taken out. Someone making $5000 gross per month is probably netting around $3600 per month. Use real take home numbers. If you use the gross number your budget will be way off and you will grossly over-spend.

A realistic budget accounts for realistic spending habits. The best example is when it comes to budgeting for food. So many people vastly underestimate how much they spend on food. I have seen budgets that have taken into account a $420 monthly car payment but only allocated $50 per week for grocery shopping for a family of four. This is not going to work. Unless you are one of these SUPER coupon savers, that $50 per week is not going to get you far. And let's face it, most of us are not super coupon clippers. So be realistic about your recurring expenses.

3. You Don't Account for Unplanned Purchases

No matter how good you are at budgeting there will always be an unplanned expense. A gift you bought for an unexpected birthday, a dinner out with a friend you just reconnected with, that Christmas Snoopy that dances to Linus' piano song (okay, I just bought this for $19.95). These are items that at the beginning of the month were not accounted for or were not anticipated. But just because your budget did not initially include those items does not mean you can overlook them and not add them to your budget. As the month progresses you need to account for every expense and make sure every dollar gets a name. If you do not you will quickly find yourself over-spending and over-budget.

4. Your Budget Is Not a Living Document

What I mean by this is that your budget changes month-to-month and year-to-year. It must account for lifestyle changes where necessary. Your budget needs to be a living document and be able to adapt to fluctuations in lifestyle, circumstance and income. For example, your April budget will not be exactly the same as your September budget. April you may need to budget for Easter pictures or Spring Break activities. Whereas in September you may need to budget for new clothes for the kids' new school year. Therefore you cannot just copy April's budget for each and every month thereafter and think the budget will remain the same month-after-month.

Even year-to-year it will change. Using the example above of buying school clothes in September, the following September the same child may have graduated and you are no longer responsible for clothing purchases. Therefore last September's budget would not be a perfect fit or match for this September.

5. You Give Up at the First Sign of Trouble

If you are just getting started with budgeting the first few months will be the toughest. You will forget to include debts or you will not budget enough money for food or an emergency will pop up and just throw your budget out of whack. Our first instinct in such situations is to throw up our hands and say budgeting does not work.

Don't give up. Allow enough time to get into some sort of rhythm with your budget until it becomes second nature. This may take a couple of months. For others much longer. Allow yourself at least four to six months time of repeatedly creating monthly budgets to see it work. It will work if you allow it to. But do not quit. The old adage of if you fall off a horse get right back on is very pertinent to your first budgeting experiences. You will make mistakes. Guaranteed. But never give up.

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So to avoid wrecking your budget, first actually create a budget. Make sure you are dealing with realistic numbers. Be able to account for unplanned and unintended purchases. Continue to come back to the budget and review it regularly so that you can make changes as needed and treat It as a living document. And do not give up at the first sign of trouble with your budget. Then you too will be able to budget and erase debt forever.

Budget Help For the Small Business Owner

Are you ready for the new year that is right around the corner? How wonderful...a brand new year lays at your feet. What are you going to do with it?

Take a look back at January of last year. Compare where you were then with where you are now. Check your progress. Are you happy with it?

Another year gone by. Sigh. It's scary how fast it went.

Are you better off than you were last January? Are your relationships more rewarding? Is your bank account bigger?

"You may delay but time will not." Benjamin Franklin

You are too old to waste time. You have an opportunity to create the life you want starting this year, right now. It's time for the "B" word. "B" stands for goal setting. "B" stands for planning. "B" stands for...BUDGET.

And it's time for you to get over your "B" word problem. You know you are supposed to put a budget together, right? Have you? Have you lined up last year in numbers and dollars? Have courage. I'll help you. I have struggled with this. I learned how to budget only because I HAD to. And so do you. If you don't set goals and measure your progress, your business won't get any better. It will get worse! Yikes! Together, we can get through it. Here are some tips for putting together your business budget for this year...and beyond.

Getting Started...

• Start...by stopping. Stop whining about budgeting. Stop claiming you can't do it. Stop claiming you don't get it. Budgeting is your best guess at what you can do for sales and expenses for a future period of time. That's all.


• Don't worry about doing it just right. You can't do it 100% right, meaning you will never guess exactly what you will have in sales and expenses. You can't do it wrong. Any swing at doing a budget is a positive move.


• Realize your power. You are incredibly powerful, so much more so than you realize. Writing your goals, crafting your budget, actually sets your goals into motion. You have everything to gain and nothing to lose by budgeting. So, let's go!

Tools to use...

• Your accounting program probably has a budgeting program in it. Use it. It will do the math for you.


• Do you provide plumbing, heating, cooling, electrical, over-the-counter sales and septic tank pumping? Create a budget for each entity. Use the departments feature in your accounting program.


• Columnar pads are your friends. You know those green tinted sheets with the rows and columns inked in already? There is nothing wrong with using a pencil and paper to work out your budget.


• Print out your Income Statements (aka Profit and Loss or P&L) from the last two years. If you don't have them, find your income tax returns. Your tax preparer created an income statement for your tax return. You can also have your check book register handy.

Basic Budgeting Steps...

• Create a reasonable chart of accounts. The chart of accounts should reflect YOUR business. Your accountant may encourage you to use THEIR chart of accounts. Doing so makes it easier for him to do your taxes. He should accommodate you and your business by helping you create a chart of accounts that is plumbing-business specific. I've attached a sample chart of accounts for you to use. Show it to your accountant and customize it to reflect the action at YOUR company.


• Simple budgeting involves goal setting for sales and expenses (costs.) Start with account number 4-1000 and work through the rest of the expenses. Of course you can add other expenses. This is just a starting point. More sophisticated budgeting involves the balance sheet items...assets, liabilities and equity (accounts 1-1000 through 3-9000.) If you are new to budgeting, start with sales and expenses. Address the other items with your accountant after you have done that.


• Find a Budget Buddy. Doing your budget with someone else is a GREAT idea. Two sets of eyes will catch more math errors. Two brains will help you think out your assumptions. And, making an appointment with another person to work on the budget will discipline YOU to keep that appointment. Budgeting is easy to blow off because it's not an urgent activity. Who should be your Budget Buddy? Another business owner is good. You can also work with one of your employees on the budget. Don't be afraid to share your financial information with a key employee. Their financial literacy makes them more valuable to your organization.

There are two ways to approach the sales line of your budgett:

1. Set a sales goal... and work from there...and


2. Fill in all your projected costs, and then see how much sales will have to be to cover costs and leave your desired profit.

 

• Either way is OK. If you start with the sales line, and there is not enough on the top to cover all the expenses you anticipate, you can go up to the top line and change your budgeted sales to make it work. Remember...the Budget is pretend. It's a guess. You can move the numbers around.


• Work your way down the list of costs and make your best guess. Reference your income statement, tax returns and check register to see how much you have spent on expenses in the past.


• You can fill in the budget for the whole year, or month by month. Month by month is a more usable format when it comes to checking actual performance to budgeted numbers.


• The budget is just goal setting. It doesn't need to be bound by strict accounting rules. You can budget for expenses you haven't incurred yet. For instance, if you want to set aside money for buying a new truck, you can budget for it first...and then buy once you have the money saved.


• Keep a Budgeting Log. You are going to pull some of your budgeted numbers from thin air. Write down notes to yourself as you come up with the numbers for your budget. When you refer to your budget in the months to come, you may forget your assumptions. Write them down in your Budgeting Log. John Young, venture capitalist and marketing maverick, helps me put my budget together for Benjamin Franklin Plumbing. He gave me this great piece of advice: Don't put down budgeted numbers that you KNOW won't happen. For instance, if you KNOW that your insurance costs are going to go up this year, don't put down the same dollar amount as you paid last year. If you don't know the increase amount yet, find out...or put in an increased number from last year. But don't put in the same number...because you KNOW that won't be it.

Use it or lose it...

• Don't bury your budget in a drawer once you consider it "done." A budget is a viable goal setting...and getting...tool. Each month, compare your actual performance to your budgeted performance. Even better, check MID month. Check your progress on the 15th of the month. If you are behind in sales, take action to crank up sales...and to cinch down expenses. If you don't refer to your budget until after the month is over, you may miss the opportunity to salvage a month.

Once upon a time, I taught skiing at Park City Ski Area. A client signed up to take a week's worth of ski lessons with me. As an instructor, a week of lessons is a big money maker. Still, I had to turn him down.

I told him, "Listen, you are only going to be here for a week. If you take lessons every day, you'll miss the chance to just SKI. You need to learn a bit, and then go practice. Have fun. Make some mistakes. Try things out on your own. If you only take lessons, you'll miss the point: YOU want to SKI." We settled on a few lessons with some free time in between.

So...go forth and budget. You know more than you think you do. Don't avoid budgeting because you are not sure that you know how. This stuff isn't that hard. If you aren't super comfortable with it, you will avoid it. Or, claim you don't "get" it. But you get it enough to give it a swing. This column has enough information for you to get started. Put together a budget for 2008. Check your progress against it each week. And have some fun out there on the steep slopes of business.

Why You Should Start Budgeting Your Finances For Yourself And Family

THE RATIONALE AND PROCESS OF BUDGETING

Here are twelve good reasons to get you started:

1. Family budgets are used as a baseline, analysis-tool and roadmap. It is a useful tool and guide. It tells you whether you are headed in the direction you want to be headed in financially. It helps you to move from spending to saving and good fiscal balance, management and responsibility.
You may have goals and dreams, but if you do not set up guidelines for reaching them and you do not measure your progress, you may end up going so far in the wrong direction you can never make it back. Can you imagine the government or a major corporation operating without a budget? No, and neither should you.

2. It is often described and justified as an empowering enabler. A budget lets you control your money instead of your money controlling you.

3. A budget is a realistic estimate and true reflection of current circumstance and means, a type of financial situation-analysis that will tell you if you are living within your means. Before the widespread use of credit cards, you could tell if you were living within your means because you had money left over after paying all your bills.
There are lots of family budgeting tools available on line that make it a fun and enjoyable task and activity, to assess and analyze your family's financial situation with minimum effort.

There is also lots of free financial software and most of it sets up easily and provides you with a detailed family budget online. It manages your finances, hassle-free and almost effortless.
Well, almost! It will require input and minimum effort through hands-on involvement in setting it up, populating, maintaining and editing it. Mvelopes.com is a good example of market offerings that are available at no cost to you, just waiting for the motivated family budgeter to embrace and try it out!
Some websites offer free financial newsletters by e-mail, with lots of money saving tips, budget advice, and other relevant personal and family-related financial information
The availability, accessibility, virtual marketplace, ease of use and more of credit cards has made the need for family budgets much less obvious. Many people do not even realize they are living far beyond their means until they are knee deep in debt, struggling to make ends meet and sinking fast into murky financial waters.

Budgeting is and can be a life and money saver, a reality check, BUT ALSO a remedy!

4. A budget can help you meet your savings goals. It includes a mechanism for setting aside money for savings and investments.

5. Following a realistic budget frees up spare cash so you can use your money on the things that really matter to you instead of frittering it away on things you do not even remember buying.

6. A budget helps your entire family focus on common goals. It is unifying families in mutual purpose and effort, working together towards a successful outcome and reward.

7. A budget helps you prepare for emergencies or large or unanticipated expenses that might otherwise knock you for a loop financially.

8. A budget can improve your marriage. A good budget is not just a spending plan; it is a communication tool. Done right, a budget can bring the two of you closer together as you identify and work towards common goals and reduce arguments about money.

9. A budget reveals areas where you are spending too much money, so you can refocus on your most important goals.

10. A budget can keep you out of debt or help you get out of debt.

11. A budget actually creates extra money for you to do use on things that matter to you.

12. A budget helps you sleep better at night because you do not lie awake worrying about how you are going to make ends meet.

Nevertheless, despite all these wonderful reasons quoted above, people are still hesitant to commit to family budgeting as standard practice in their households. We might again want to probe a little deeper still and ask why?

TOP THREE CAUSES OF BUDGET FAILURE

Many people make an honest attempt to budget, but become discouraged and give up before they are able to accomplish any significant financial gain. The top three causes of budget failure come into play before you even begin to set up your budget. Awareness of these budget busters, is your first line of defense in the Battle of the Budget.

Budget Buster #1 - Negative Attitude

It cannot be emphasized enough--a positive attitude about budgeting is essential to your success. If you think of budgeting in negative terms (such as a financial diet, financial handcuffs, restrictive, penny-pinching, a sacrifice, etc.), you are sure to fail, unless you are a martyr or a masochist who finds some strange reward in a punishing experience. For purposes of this article, we will assume that you are neither.

A positive attitude means you think of a budget as a means to an end--a way to achieve your dreams and goals--and that postponing the instant gratification of spending all the money you earn is worth the rewards you will earn in the end.

Budget Buster #2 - Lack of Motivation

What is your motivation for budgeting? Are you trying to appease a nagging spouse? Following the terms of a debt repayment plan with a consumer credit counseling agency? Complying with an agreement made in bankruptcy court? These are not bad motivations, but they are external pressures and will probably not be easy to maintain over time. The best motivations are internally generated: do you honestly believe that budgeting can help you meet your goals?
If you need a little help in the motivation department, see "Twelve Reasons Budgeting Can Improve Your Life". A quick re-read of these will surely inspire and ignite a motivational spark or two!

Budget Buster # 3 - Unrealistic Expectations

What do you expect to gain from instituting and following a budget? Do you think that setting up a budget will reveal large caches of hidden cash or that the budget fairy will sprinkle fairy dust over your budget and magically transform your spending habits after a month or two of tracking expenses?

The reality is that budgeting is an endurance event--those who stick with it, through thick and thin, will come out ahead financially. Do not expect miracles. What you WILL see if you stick with it is steady, measurable progress towards the goals that really matter to you.
Starting a budget without having a positive attitude, internal motivation, and realistic expectations, will probably set you up for failure. You can greatly increase your chances of success by ruling out the three biggest budget busters before you even begin.
Family budgeting - just the thought of it makes most of us cringe. However, mostly, we do attempt to curb our spending and live within our means. Others fall into bad habits, habitual spending patterns or impulse shopping and over-extend themselves, landing knee-deep in debt!
Ironically, one of the first remedies for any debt consolidation or repair strategy, is to take a long hard look at the budget and financial patterns within the household! It is almost like running a diagnostic.

To take a closer look, you are in effect placing your family dollars under a magnifying glass and microscope. This can prove both challenging and painful for most people. We hope to alleviate some of that initial discomfort and apprehension with this handy step-by-step guide and tips.
Most financial advisors will tell you that you have to reward yourself for good fiscal responsibility, discipline and habits, to increase your motivation and success levels.
Budgeting is the first step, sticking with and to it, a close second and the sometimes overlooked but ever-important reward, has to keep the motivation going! To repeat and continue to experience the benefit of the budgeting cycle and discipline could be an uphill battle, but there are calmer seas ahead.

Cash management, savings, planning for retirement, setting financial goals etc. active and hands-on, is becoming increasingly important for the survival and well-being of our families everywhere.

Be your own best expert with coming up with new ideas on how to save money, budget better and spend less! Your unique strategies stem from a deep understanding of your own situation, demands, and needs. Discover which tips and ideas work best for you. After all, fiscal management and finances are definitely not a one-size-fits-all solution environment. It is personal, customized and unique.

10 Tips to Make Sure Your Financial Budget Will Succeed

You've analyzed your past expenses, put them into spreadsheets, loaded Quicken with all of your data and come up with a budget. Now what? The tough part! You actually have to stick to your budget and put your plans into action. This is easier said than done. In many cases you will have forgotten about your budget and your financial goals 6 months or a year down the road. How do you keep this from happening to you?

Here's how. Make sure you follow some of these tips below so this doesn't happen to you.

1. Create a budget with realistic targets - Let's say one of your budget goals is to not eat out for lunch or dinner on a regular basis. If you are honest with yourself you may find this to be an unrealistic goal. Sometimes it's a nice break to eat out and have a relaxing rewarding evening. In other words, don't set the bar too high. Drastic and unrealistic goals are one of the surefire ways your budget will not succeed.

2. Budget for expenses that don't occur on a routine basis - Make sure you give consideration to expenses that occur once a year, such as holiday presents, birthdays, vacations, weddings, car maintenance costs, etc. These expenses don't occur every month and they will bust your budget plans wide open. Make a list of these events on a calendar and put a dollar figure to them. Place them in the month they are expected to occur so you can plan in advance how you will pay for them. The regular routine expenses are not the reason your budget will fail. It is these "gotchas" that will wreck havoc on your budget if you don't plan for them.

3. Put your budget in writing - Take the time to write down your budget plans. Making a mental note of your budget goals is a recipe for failure. Don't assume that your financial future will take care of itself by making a simple mental note to yourself. If you have your budget goals detailed in writing you can review and remind yourself weekly and monthly of your financial goals.

4. If you have a bad month or week, don't give up! - Let's say you have been reaching your budget goals for three months. In the fourth month, for whatever reason, you didn't reach your budget goals. Maybe you even stopped trying to stick to your budget! If this happens, don't just throw your hands up in the air and admit to failure. Everyone falls off the wagon sometimes. Your budget is a journey. There will be bumps in the road, so the key is to realize that everyone makes mistakes. This relates to a story I like about a great old time golfer named Walter Hagen. Before each round of golf, he told himself that he would have 4 or 5 bad shots. During the golf round, if he hit his ball into a bunker, he would tell himself, "There is one of my bad shots that I was expecting", hit the ball out of the bunker and move on. It didn't phase him one bit because he had knew there would be some bad shots in his round.

5. Adjust your budget over time - This one is a biggie! It can take months or even years to fine tune a personal budget. When you initially made your budget plans, you probably had to guess at some of your figures. They might not have been in touch with the realities of every day life. For example, you may have underestimated your monthly grocery or utility bills. If this happens, analyze all of the underlying money that was spend in this category to see if your initial estimate was unrealistic. If it was, try to come up with a more accurate number and then to stick to that new figure. It is this type of adjustment that is one of the keys to making sure you can stick to your budget.

6. Review your budget every month - This is where you will make any adjustments that are needed. Set aside the first day of each new month to review your income and expenditures and match them to your budget goals. By actively reviewing your finances and comparing it to your budget, you can adjust your spending habits. This gives you a chance to analyze areas that exceeded your budget expectations and make the adjustments in your spending habits or your budget. The goal here is to not forget about your budget. One tip that has worked for me is to put a printout of my basic budget goals on the refrigerator. That way every day, several times a day, I would notice my budget goals sheet. I may not read it every time, but I notice it and it reminds me that I need to stick to my budget. That is why tip number 3 is so important.

7. Set specific short-term goals - Let's say one of your budget goals is to have all of your credit card bills paid off in two years. If your credit card balances total $20,000 that would be $10,000 a year. Divide that number further into quarterly reductions in your credit card bills, in this case $2,500 every 3 months. Now, this is a more tangible budget goal to shoot for isn't it? I find that when I divide intermediate and long term goals into short-term tangible stepping stones, I am able to feel a greater sense of accomplishment and am more likely to succeed. This brings us to number seven...

8. Reward yourself - That's right! Treat yourself when you reach your some of your short-term goals. Since your financial budget is really a journey, take some time to smell the roses on your way. Sticking to your budget should not be a restrictive, unpleasant experience. Not only should you take the time to enjoy your financial accomplishments along the way, but use part of your budget for fun things that you enjoy. Just make sure your rewards don't end up breaking your budget!

9. Pay yourself first - I'm sure that one of your budget goals is to save and invest a portion of your income. One of the keys to make sure you succeed at this is to do what the IRS does with your paycheck, take it out of your discretionary income immediately. This way, the money is saved away right off the bat. Move the money immediately into a savings or mutual fund account. Many mutual fund companies can setup automatic deductions from your paycheck. Despite your best intentions to save, the hectic, daily demands of life can reduce the amount you are able to save.

10. Attitude is everything - When most people think of a budget, they picture restrictions and pain. Almost like a diet. You know what happens with most diets? They don't seem work for long! First, if your budget is too strict, too restrictive on your spending, it won't work either. However, you will need to limit your spending in some areas and this will take some adjustment in your attitude. I found that when I am feeling limited and sorry for myself when I can't purchase something that I want, I remember my financial goals I set with my budget. I think about the satisfaction I feel when I reach those goals. Over time, you find that you don't want to disappoint yourself by breaking your spending goals on a spur of the moment purchase. Now, I actually get more pleasure knowing that I am reaching my budget goals when the thought of an impulse purchase crosses my mind.

If you follow these tips, your budget plans are more likely to be a great success. By taking some simple steps you will find that living within a budget is not as tough as you imagined. It can actually be fun and rewarding!

The Delicate Art of Balancing The Budget

Government budgets represent between 25% and 50% of he Gross Domestic Product (GDP), depending on the country. The members of the European Union (Germany, France) and the Scandinavian countries represent the apex of this encroachment upon the national resources. Other countries (Great Britain, to name one) fare better. But even the more developed countries in South East Asia do not clear the 25% hurdle.

The government budget, therefore, is the single most important economic decision, the most crucial economic event every (fiscal) year.

The government finances its budget mainly by taxing individuals and corporations. Ultimately, households pay the bill. Even corporations are owned by individuals and earn their money by selling products and services to individuals. Higher taxes are likely to be passed on to customers or to employees. There are numerous kinds of taxes, regressive and progressive, direct and indirect, on earnings and on property - but they all serve to finance the budget.

Another method of financing the budget is by borrowing either in the capital markets (by selling bonds as the government of the USA does) - or by "voluntarily" deducting part of the wages (as Israel used to do until a decade ago). Such borrowing has grave repercussions: the national debt grows, debt service (repayments of interest on the debt plus the principal of the debt) consumes more and more of the national resources and the government crowds individuals and - more importantly - businesses out of the credit markets. In other words, the money that is lent to the government is not available to finance consumption, investments and working capital for businesses. The competition on the scarce resource of capital increases its price, interest rates. Government borrowing has disastrous economic consequences in the long term: reduced consumption, heightened interest rates, stagnant investments - all leading to recession and negative or reduced growth rates.

Recognizing these unfortunate results, governments the world over have been converted to the new religion of balanced budgets or, at least, reduced and controlled budget deficits.

The two best known examples are the United States and the European Union.

One of the things which used to distinguish between political camps in the USA - Democrats versus Republicans - was their attitude towards the role of government in the economy. The Democrats believed in an active government, whose role it is to ameliorate the excesses of the markets. This logically led to less hysteria over the size of budget deficits. The Republicans firmly believe in Bad Big Government and in the overriding necessity to constrain it and to abolish as many of its functions as politically and economically feasible. Small Government was a pillar of the treaty with the people which led the Republicans to their landslide Congressional victory in 1994.

It is an absurd that it was a Republican president (Reagan) who was responsible for the biggest increase in the national debt since the USA was established. He reduced the interference of government in economic life mainly by reducing taxes - without the commensurate slimming down of government itself. The result was apocalyptic: enormous twin deficits (budget and trade), a collapse in the exchange rates of the Dollar against all major currencies, recession and the steepest stock market crash in 1987.

Today, the USA owes 5 trillion USD. True, this is only 60% of the GNP - but this time statistics is misleading. The interest payments on this "benign" level of debt amount to 15% of the budget, or 250,000,000,000 USD per annum. This is more than any other expenditure item in the budget, barring defence. And it is getting worse.

This, however, belongs to the past. Clinton is as much a Republican as any and both parties share the conviction that the budget must be balanced by the beginning of the century. It seems that it is well on its way there. The projections of the objective and reliable Congressional Budget Office (CBO) are positive: the budget will be balance shortly, long before it was projected to do so.

But it was an American, Benjamin Franklin, who once (1789) said: "Only two things are certain in this world - death and taxes". This spectre of a balanced budget already provokes interest group to pressurize the administration to be less tight fisted and possessed more of a social conscience.

Nowhere was the new "less deficits" doctrine more apparent than in the Maastricht Treaty and, especially, in its criteria. The latter determine which of the member countries of the EU will join the Euro single currency zone in the first wave of entrants in 1999. One of the more important criteria is that the deficit in the government's budget will not exceed 3.0% of GDP ("three point zero" - emphasize the Germans who are very worried about the stability of the currency which will replace their treasured DM).

As a result of this rigid criterion, governments have increased taxes (France), imposed one time levies (Italy), engaged in creative accounting (again France with many others) or unsuccessfully tried to do so (the failed attempt to revalue the gold reserves in the coffers of the Bundesbank in Germany). Some were aided by buoyant economies (France), others by favourable public opinion (Italy), yet others by farsightedness (Germany's Kohl). All of them pay a dear economic, political and social price. By restraining the budget deficit, they induce recession or fail to encourage budding economic expansions. Unemployment rates remain stubbornly high, so do interest rates.

This is the price of adhering to an economic fad.

Balanced or low deficits budgets are a good things when the economy is roaring ahead. But there are certain things that only governments can do: defending the country, maintaining law and order, disaster relief, ensuring market competition. One of the more important functions of any administration is to act anti-cyclically, to encourage economic activity in times of recession - and to hold the economic horses when they go wild. A government cannot do this when its hands are tied behind its back by a totally arbitrary limitation: no more than 3% budget deficit (why 3? why not 2.65%?). This Maastricht criterion will prove, in the long run, to be lethal to the very idea of a European Union.

What is a budget?

It is a program. It charts the government's expenditures and allocates its resources for a period of one fiscal year. Some fiscal years start and end in January (Israel), others in October (the USA). But budgets always relate to fiscal years because of their dependence on tax revenues. Modern government budgets make a clear separation between current expenditures and the development elements. These were mixed in the past and this served to cloud issues and to disguise gross misuse of funds.

But this structural separation did not change anything basic. Budgets are statements, mainly of policy. The budget delineates clearly - and if it doesn't do so, it surrenders through careful reading and analysis - the political, economic and social priorities and goals of the government which prepared it. Politicians can talk a lot about the importance of this or that - but it is only when they put (other people's) money where their mouth is that an indisputable priority is established. Money talks (loudly) and the budget proclaims the true face of the government which conceived it.

In this sense, a budget is also a monitoring tool. By comparing financial projections, finances allocated to specific purposes in the budget - to the actual use made of the funds and to the extent that they were expended, it becomes clear whether the government "has kept its word", "changed its mind", or "reneged on its promises". A budget is a promise, it is a contract between the elected government and the nation, it is approved by parliament and has the status of a law. A budget can be altered only through a vote in parliament. It is a document of unparalleled importance, second only to the constitution.

Still, budgets (moreso than constitutions) are like living organisms:

As circumstances change, new priorities and emergencies alter the allocation of resources. The budget is based on economic projections and predictions, not all of them successful and come true.

This is why additional or supplementary budgets are introduced by governments during the fiscal year. These are updated versions of the original budget. They reflect the changed reality better than the outdated original. They help to redefine national priorities, reallocate resources, modify national spending.

These budgets usually include tax increases, new economic or social programs, or additional specific expenditures. In some countries, the legislator must show where will money be found to finance the newfound enthusiasm embedded in the new expenditure items.

Budgets are also influenced by exogenic factors, not controlled by the government. Force Majeure cases, like the floods in the Czech Republic (3 billion USD) and in Poland (2 billion USD). Geopolitical processes like wars and peace agreements in the Middle East (the 1979 peace cost Israel almost 4 billion USD to implement). The onerous, depressingly uniform demands of the IMF from poor countries: austerity, fiscal tightening, a monetary squeeze, privatization, deregulation and so on.

Some countries are voluntarily subject to externalities: the EU countries agreed to amend their budget in order to comply with the Maastricht criteria. The French and German Premiers appointed special committees to review the budget. The reports submitted by these committees forced the governments to cut spending, increase taxes and tighten the fiscal discipline (never mind that the French committee failed to take into account the renaissance of the French economy and greatly exaggerated the projected budget deficit). In all these cases an act of rebalancing the budget is called for.

The USA has a peculiar budgetary procedure. Its Federal budget is made up of 13 separate bills. They are submitted to Congress for approval by the administration. When the President and Congress disagree, some of the bills are not approved and certain government operations are shut down. This happened in the 1996 fiscal year. In fact, the budget for fiscal year 1996 has been approved only after the 1997 budget was.

In the case of such a deadlock, stop gap budgets are passed by Congress to allow the government to continue to function until a final budget is positively voted on.

Budget are acts of humans. They represent hard data implausibly coupled with aspirations, projections, goals and hopes. They are prone to mistakes, greed, cronyism, ulterior motives. The existence of a mechanism to amend budgets is, therefore, of the essence and to be greeted. A budget amendment is often ceased upon by the opposition as proof of the government's fallibility and failure. But in a changing world - they who do not adapt through change are doomed. Governments that amend their budgets midway merely admit that they are made of humans and are doing their nation a service.