The primary tool discussed in this chapter for helping to manage and make financial decisions is the budget. To be more exact, the comprehensive budget along with current financial statements. It is also very important to understand one’s current situation as well as, knowing where you would like to get to, in terms of goals. Another factor that may be seen as a tool is personal ideas and goals. These are what helps you get from where you are to where you want to be. A budget will only tell you where you are at the present time.
A comprehensive budget should be conservative in nature. Meaning, do not put the projected expenses below where you believe they are or may be. Instead, err on the side of caution and make them larger. Conversely, the income should be conservative and below any expectations. Being conservative helps to minimize variances on a negative sum. A good guideline is to overestimate expenses by 5-10% and underestimate income by the same percentages. …show more content…
It does so by giving you real-time information comparing your projected income and expenses with the actual income and expenses for the timeframe allotted. A good budget can serve as a strategic plan in terms of where one needs to focus on and also indicates where else one can look at as possible resources. This depends on variances.
The difference between projected and actual is a variance. Variances help to demonstrate deficiencies in either the income or expenses (can be a negative or positive). Variances serve as major indicators of where one should place careful review, emphasis, and action.
Current financial statements help you to evaluate what your current condition is in terms of finance. They are based on historical income, expenses, and cash flow. They serve as a very good assessment tool for beginning a comprehensive
A comprehensive budget should be conservative in nature. Meaning, do not put the projected expenses below where you believe they are or may be. Instead, err on the side of caution and make them larger. Conversely, the income should be conservative and below any expectations. Being conservative helps to minimize variances on a negative sum. A good guideline is to overestimate expenses by 5-10% and underestimate income by the same percentages. …show more content…
It does so by giving you real-time information comparing your projected income and expenses with the actual income and expenses for the timeframe allotted. A good budget can serve as a strategic plan in terms of where one needs to focus on and also indicates where else one can look at as possible resources. This depends on variances.
The difference between projected and actual is a variance. Variances help to demonstrate deficiencies in either the income or expenses (can be a negative or positive). Variances serve as major indicators of where one should place careful review, emphasis, and action.
Current financial statements help you to evaluate what your current condition is in terms of finance. They are based on historical income, expenses, and cash flow. They serve as a very good assessment tool for beginning a comprehensive