Budget Allocation in the Planning Process

by Kathy Burns-Millyard, Demand Media
    Plan budget allocations based on your personal needs.

    Plan budget allocations based on your personal needs.

    Budget planning can be a pain in the neck. You have to sit down and face reality about how much money you actually make, then you have to try and figure out how to divvy it all up coherently enough so that everything is allocated for. Budget allocations are a personal decision, but you can get a jump-start on them by using national averages, then revising based on your unique lifestyle and goals.

    Fixed Expenses

    Fixed budget expenses are those that stay the same from one month to the next; that makes them the easiest to plan for. Simply write down a list of all your fixed expenses such as the rent or mortgage and your car payment, then note down how much money is needed for each every month. Don't forget to plan for annual or biannual fixed expenses such as car insurance and registration fees. The amount of each bill is the allocation amount in your budget plan.

    Flexible Expenses

    Flexible expenses can be trickier to plan for because by definition they can change. If you're not paying attention, flexible expenses can eat up an entire paycheck in one fell swoop. The best way to work flexible expenses into your budget planning is to treat them as fixed expenses instead. Plan to spend only X amount on food and Y amount on entertainment for example, then track your spending to be sure you don't go over your allocated amounts. On average, other people spend 15 to 20 percent of their take-home pay on food and 3 percent to 6 percent on entertainment.

    Needs and Desires

    We all have needs and desires to work into our budget plans. If you try to allocate funds for needs alone, you are more likely to blow your budget in the long run. According to financial guru Dave Ramsey, you should allocate at least a small portion of your budget for fun stuff, or pocket change. This small, extra amount that you can do anything you want with helps keep you from feeling deprived so the rest of your budget stays on track.

    Financial Goals

    New Mexico State University explains that creating a budget is a means to an end. Your budget should be designed to help you meet your personal goals and financial priorities. If buying a new car is a priority then allocate funds to that goal as part of your planning process. Realize that as you reach goals your priorities will change; your budget plans should be regularly adjusted to reflect those changes as you go.

    References

    About the Author

    Kathy Burns-Millyard has been a web designer, developer, Internet consultant, photographer and prolific professional writer since 1997. Specializing in business, technology, environmental and health topics, her work has appeared in "Wireless Week" magazine, "Entrepreneur" magazine, "Computer User" magazine and in hundreds of publications online.

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