What Are The Four Elements Of Budgeting Cycle

What Are The Four Elements Of Budgeting Cycle: Budgeting is an essential element of financial planning for any individual or organization. A budget is a roadmap that tells you where your money is going and where it needs to go to achieve your financial goals. Budget can also be referred to as an estimation of expenses that an organization or individual expects to incur in the future (Saini et al., 2022). The budgeting process typically occurs annually, but can also be done on a quarterly or monthly basis depending on the needs of the individual or organization. There is also an important aspect known as budgeting cycle which involves the steps or phases that an individual or company and even the government requires to go so as to come up with the budget. The budgeting cycle has several major elements that determine the entire process.

Preparation is the first and arguably most important element of the budgeting process. People together with companies need to gather all of the relevant information and documents that they will need to create an accurate and comprehensive budget. This includes things like income statements, expense reports, bank statements, and tax returns. The next element is to set financial goals. What do you hope to achieve with your budget? Do you want to save money, pay off debt, or both? Once you have set your goals, you can start to develop a plan of how to achieve them.

The next element involves tracking your income and expenses. This can be done manually or with the help of budgeting software. You will need to track both your fixed and variable expenses in order to get an accurate picture of where your money is going.

The other crucial element of budgeting cycle involves developing a budget. Once you have all of the relevant information, you can start to develop a budget. There are many different ways to do this, but the most important thing is to make sure that your income exceeds your expenses. This will help you to achieve your financial goals. The following element involves implementation of the budget. This means making changes to your spending habits and sticking to the plan that you have developed. It can be difficult to stick to a budget, but it is important to be mindful of your spending in order to reach your financial goals. The other element in the budgeting process is to monitor your progress (Saini et al., 2022). This means tracking your income and expenses over time to make sure that you are on track to reach your goals. You may need to make adjustments to your budget as you go along, but it is important to monitor your progress so that you can stay on track.

There is also evaluation of the budget as an essential element of the budgeting cycle. After you have been following your budget for a period of time, you will need to evaluate it to see if it is working. This means looking at your income and expenses and seeing if you are on track to reach your goals. If you are not on track, you may need to make adjustments to your budget. The budgeting cycle is a vital part of financial planning. It helps you to set goals, track your progress, and make adjustments as needed. By following the steps above, you can ensure that you are on track to reach your financial goals.

Reference

Saini, A., Shukla, R., Joe, W., & Kapur, A. (2022). Improving nutrition budgeting in health sector plans: Evidence from India’s anaemia control strategy. Maternal & Child Nutrition, 18(2), e13253. https://doi.org/10.1111/mcn.13253

 

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