# Budget Planning and Analysis

Living with a budget doesn't have to mean living on a budget. You can create a budget that restricts your spending, or you can use a budget to track your cash flow to let you see how you're spending your money. However you use a budget, monitor it on a monthly basis, and make adjustments as necessary.

## Budget Planning

If you can project your annual income and expenses, it's relatively easy to create a budget. Start with your income, which will make it easier to make accurate spending decisions, suggests the Better Business Bureau. Then calculate your expenses, dividing them into fixed and variable categories. Fixed expenses are expenses that are the same each month, such as car payments, or that occur every month, such as groceries. Variable expenses are those which change each month, or don't occur regularly. You can place monthly expenses like groceries in the variable category, if you can't project an average monthly figure.

## Living Budget

If you're concerned that you may not have enough income to pay your monthly bills, save for retirement, or handle emergency situations, you can create a budget that guides your spending. As you enter each expense in your budget, subtract it from your total income or available cash. For example, if you earn \$5,000 per month, you can subtract each entry into your budget from that figure. If you want to save \$500 per month, you'll only have \$4,500 per month to spend, and that will be the figure from which you deduct expenses.

## Tracking Budget

If you're confident you have enough money to pay your bills, accrue savings and meet emergencies, you might want to create a budget that tracks and analyzes your financial situation in real time. Create a budget that projects monthly expenses, then enter in your actual spending each month. Compare these two columns at the end of each month to determine if you are managing your money wisely.

## Annual Projections

Having real-time numbers and annual projections may alert you to areas where you're overspending. Basic software spreadsheets let you project these numbers using simple formulas. For example, if you want to see what you might spend on dining out during the course of a year, create a running total column which tracks the amount of money you've spent on dining as you enter that information. Project your annual spending by adding an average monthly spending column that divides the numbers in the running total column by the number of months that have passed. For example, if you have spent \$125, \$150 and \$175 on dining in January, February and March, your running total is \$450 and your average monthly spending column will show \$150 per month. Add one more column, which multiplies your average monthly spending column by 12 months, and you'll see that at your current rate of spending, you fork out \$1,800 on dining out each year.