JACQUELINE R.

PALOMO

FINANCIAL MANAGEMENT

DEFINITION OF BUDGETING

Budgeting is the process of creating a plan to spend your money. This spending plan is
called a budget. Creating this spending plan allows you to determine in advance whether
you will have enough money to do the things you need to do or would like to do.

Budgeting is a tool of planning and control.Budgeting involves the steps of setting

short-term objectives, specifying programs, and expressing them in
the budgets. Budgeting includes sales, production, distribution and financial
aspects of the firm.

Budgets are of three types -- balanced budget, surplus budget and deficit budget.

The purposes of budgeting are for resource allocation, planning, coordination,

control and motivation. It is also an important tool for decision making, monitoring
business performance and forecasting income and expenditure.

Benefits of Budgeting

 Gives you control over your money – A budget is a way of being intentional
about the way you spend and save your money. ...
 Keeps you focused on your money goals – You avoid spending unnecessarily on
items and services that do not contribute to attaining your financial goals.

Since budgeting allows you to create a spending plan for your money, it ensures
that you will always have enough money for the things you need and the things that
areimportant to you. Following a budget or spending plan will also keep you out of
debt or help you work your way out of debt if you are currently in debt.