How to make a business budget plan

tony-petersonA budget is a spending plan created to keep a check on finances. For households, a budget plan helps separate spending from saving and provides an estimate of the overall monthly income. For businesses, drafting budgets does more than just determining how much is being spent and saved. It provides the organization with a clear vision of their current financial position and a guideline for the future management of funds. Moreover, it helps reduce the risk associated with running a large organization.

Elements of a business budget
For companies trying to map out a spending plan for themselves, it is essential to follow a certain procedure and include certain key components. These are noted below:

  • A budget should clearly mention the business costs and revenues.
  • It should also include the annual business profits or the annual cash flow so that it can be determined how much finances are left over for capital expenses.
  • It should be created with a time frame in mind or else comparisons for improvement would not be possible. If not monthly, a business budget must be made at least yearly.
  • It is wise to create a budget with the help of professional accountants or a business financial software rather than to haphazardly write one down.
  • Finances are not to be taken lightly!

    How to outline a business budget plan?
    An organization wanting to sketch a budget for itself can do so by following the steps given below.

Choose a budget style/ format
Budgets have normally been drafted manually i.e. on paper, but with so many technological advancements, it is now possible to make use of a spreadsheet software to create a budget. Seeking professional help is always a good idea.

Determine a target for profit margin
For an organization, the profit margin is equal to its estimated revenues minus its expenses. Setting a target for profit margin is important. It acts as a goal for the organization to strive towards. Of course, it is advisable to set such targets with the help of a financial advisor, keeping in mind your business operation in question.

Specify fixed costs
Fixed costs are those that do not vary throughout the year such as rent, property taxes, and insurance. Add up all such costs. If previous financial data exists, past fixed costs can be used easily by adjusting them for any increments in bills.

Estimate variable and semi-variable costs
Variable costs vary throughout the year and mainly include the cost of inventory and raw materials. Semi-variable costs have both a fixed and a variable component. When all such lead costs have been estimated, they should be added up.

Add all costs
Once all types of costs have been estimated, they should be added together. Their total would form the cost base for the year. Now check whether this amount is greater than or less than revenues and whether it helps achieve the target profit margin. If it happens to be less than revenues, thus rendering the profit margin target unachievable, the business should look into ways of cutting down these expenses.

Ways to Manage Your Personal Finances Effectively

1. Always keep a record of your monthly spending.
Several people do not even know how much they have spent each month on clothing, housing, entertainment, and food. Whether you are paying with a debit card or a credit card, find the total of your expenditures at the end the month so that you have a better idea of how you are spending your income.

2. Set up a household budget plan that you can follow.
Using the expenditure record that you have compiled, come up with a realistic budget so that it is easier for you to manage your money. Keep a track of how well you follow the plan each month.

3. Rainy day funds.
Do not forget about saving some amount each month since your savings are a rainy day fund, which will be useful when unforeseen emergencies or expenses arise. Make sure you reserve at least 10% of your monthly paycheck to deposit into a savings account. If you earn or find extra money, put that into a savings account too.

4. Pay on time.
Make a habit of paying your monthly bills on time to avoid costly late charges. You can set reminders for when each bill is due. The best practice is to pay the bills as soon as they arrive.

5. Do not forget to review your credit report.
The details of your credit report can have a huge impact on your financial future. Obtain a free report once every year, and check it for accuracy and make sure to dispute any errors.

6. Getting your credit score is also crucial.
The three-digit credit score can help lenders and businesses know how well you manage your finances and credit. The credit score ranges between 500 and 850 with the higher number representing a better rating, meaning you have more chances of obtaining credit at a better rate. You can buy your credit score via any of the nationwide credit reporting agencies after you have received your free annual credit report.

7. Free yourself from credit card debt.
Credit cards make it easy to pile on debt, and if your debt adds up faster than you can pay it off, it means you are living beyond your means. The best thing to do is to stop using credit cards and pay off the existing balance using a Toronto debt consolidation service if needed. The sooner you do so, the less you will pay in interest. However, it is significant to know that not all debt is bad; taking loans for higher education or purchasing a home is an investment in your future.

8. Make the most of your free money.
If your employer offers you a contribution match for your retirement saving or health saving accounts, make sure that you are contributing enough to get the maximum match amount as maximizing your contributions can reduce your taxable income.

9. Assess and evaluate your insurance policies.
Insurance is an essential tool for helping you with financial hardships. You can talk with your provider to ensure you have the appropriate level of protection and you are not paying too much for coverage.

10. Use only legitimate financial institutions.
Millions of people do not trust financial institutions or traditional banks to manage their money, but those who do benefit a lot. You can open a checking and savings account at a FDIC insured bank, credit union or savings and loan association.

Importance of Home Budgeting

tony-petersonHaving a home budget may seem to be a tedious process for many households but it is an aspect that everyone must have in order to manage family finances. Without a home budget, many families have found themselves in financial crises for a simple fact of overspending.

Home budgeting is therefore very important because it will spare you from spending your family finances on impulse buying or wastage of family resources. Since family budgeting involves tracking income versus expenditure, this will help you to understand how much of your income needs to go to investment as well as how much goes to savings and how much goes to expenses.

debt consolidation las vegas nevadaHome budgeting will also help you to avoid falling into unnecessary debt which has landed many into deep holes of consumer debt. Having credit cards that fund your consumption will only make you a slave to debt and hence tracking your expenses makes it easier for you to track where most of your family income is spend and hence you will be able to make necessary adjustments.

There is also the aspect of planning for emergencies that are likely to occur by controlling your expenditure and setting aside some savings for a rainy day. These emergencies may include; car repairs or medical bills that may arise suddenly.

It also helps you and your family to live a lifestyle that is within your debt-freelimit. Living beyond your limits as a family will only sink you in debt. This will also avoid tensions and strife within your family that may come as a result of not being able to manage family income well.

Home budgeting will also help you pay bills on time as this will enable your family receive services from service providers without interruptions. Water and electricity bills need to be sorted out first to avoid disconnections by these service providers.

There are several online budgeting sites like Credit Consolidation USA that are easy to use and hence will assist you in getting a home budgeting software.

Personal Loan Information

tony-petersonBy simple definition, personal loans involves borrowing money from a lender so as to accomplish a certain task in one’s life at a specific moment. From the need to clear up bad credit to getting the funding to go for that trip you have always dreamt of, a personal loan offers a solution for you. But is this a good idea?

Saving is a virtue many humans have not been able to embrace. It is exactly why people find themselves in debt in the first place. When the paycheck gets to you, it is normal to budget and have every penny planned for leaving nothing to save let alone keep aside for luxury and emergencies. With personal loans however, it gives you the motivation to set aside a sum of money. The better news is that you get to have the bulk sum, spend it and later on deal with paying it back. These payments are much more compelling than trying to save in advance. The returns of the investment made with the money borrowed will also be of great help in paying the amount. It is just like being paid before doing the actual job!

debt consolidation in TorontoUnlike other loans like mortgage and personal loans where the lender must have a certain valuable property as collateral, there is usually none in personal loans. This is why these loans are so rare to get because in case a client decides to refuse the personal loans repayment, then the bank incurs losses with nowhere to get their money back from with the only remaining option being to file a case against the defaulters. Remember that unsecured loans will charge interests at much higher rates that secured ones. Though the most common personal loans are unsecured, secured ones are also available and the choice depends entirely on the client.

debtThe interest charged on personal loans can be either fixed or variable but the prior is the most common. Fixed rates imply that the rates do not change over the entire period of the loan while variable rates are bound to fluctuate from time to time. Whatever type it is that a lender offers, remember that the interest rate charged will depend on your credit score. The better your credit score the lower the interest rates you will get and vice versa. So, have you been paying all your bills in time? Then probably a personal loan is a good idea for you because you will get the financing for whatever you need without having to pay so much as interest. Just remember to pay back the personal loans in time so as not to spoil your credit records.