Planned Budget vs Real Budget – the difference

30 Oct 2012

Making one’s budget is a continual process that is refined over time. Despite all the care that’s put into planning, it always ends up getting modified to fit the reality. A planned budget is different from a real budget. Budget Express is an excellent tool for comparing the two. Let’s take a closer look.

Why a planned budget?
Making a budget starts by examining past spending in order to better predict future expenses so that we can more easily attain our financial objectives. It’s what is called the planned budget, and gives a global picture of money coming in and going out.

To prepare the planned budget:

Step 1: Identify your income and expenses
– List all your sources of revenue. Don’t forget income such as pension, alimony, rental income, etc.
– Make a list of your biggest monthly expenditures: 100% fixed costs, and about 80% of variable costs (others can be added later).

Step 2: Set your priorities!
We all have different priorities. What are yours? We recommend that you add to your list:
– Mandatory expenses (rent, transportation, public services, etc.)
– Emergency savings equivalent to 3 months of salary
– Automatic retirement savings
– Identify what you value most. The purchase or renovation of a home, a chalet? A new car? Yearly vacation? Saving for your children’s education? Always having money for hobbies? A golden retirement?

Step 3:  Assign a monetary value to your priorities

Establish the necessary amounts to each of the points in Step 2 and compare them all to the monthly total revenue (net). If the amount that you can save is weaker than you were hoping, cut back on spending or revise your projects according to your capacities.

You will see before your eyes your planned budget, meaning your short term financial objectives.
With Budget Express, the planned budget is prepared with the help of the assistant that automatically starts when you create a new budget. Just follow the steps on the screen.

Why a real budget?
When your planned budget is well put together, you can begin comparing it to the reality and see if it holds out, or if any tweaks (adjustments) are necessary.

To achieve this, at least once a month, write down in your budget the expenditures that you made. With Budget Express, you can do it manually or by electronically importing your bank statements.

How to do this?
Manually right-click on a calendar operation, then click on “Modify operation”. Check the box “Compare the amount planned with my actual expenses”, enter the actual amount, then click “OK”.

How to do this?
Manually right-click on a calendar operation, then click on “Modify operation”. Check the box “Compare the amount planned with my actual expenses”, enter the actual amount, then click “OK”.

By importing your bank statements (what’s referred to as “bank reconciliation”), everything is done automatically as written on this article. “Bank Reconciliation with Budget Express: Easier than you think

Go to the “Details” tab, then click on “Compare”. You will automatically see the list of your income and expenses, both planned and actual.

As needed, you’ll be able to adjust your planned budget for the next few months in order to follow through with your priorities!




Posted in Blog, Did you know

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