Before going to somewhat complex theory of "Budgeting", it would be helpful to go through the following few paragraphs to make the topic easy-to-understand, in context of personal budgeting.
Everyone may have heard the saying "Cut your coat according to your cloth" and the same idea is the basic theme of my selected topic.
In this context, Budgeting is an important tool to foresee and plan your future. This tool is equally important for an individual as well as for a business; whether big, medium or small. Keeping in view the current devastating economy conditions all over the world, which are effecting adversely not only an individual but even big organization can’t help themselves to keep away the negative effects of falling economy; Smart Budgeting can minimize the adverse effects of this economical crisis.
The simplest rule behind Smart Budgeting is “one should identify and weigh its resources before starting any project”. I’m going to concentrate on the Smart Individual Budgeting, right here; therefore, one must keep an eye on his/her future earnings before making a spending-plan. With respect to the relationship between “Earning” and “Spending”; there are three simple possibilities mentioned hereunder:
Adverse Situation:
Earnings < spending ="="=""> Loan (Credit Cards) ==> Interests ==> Deep in Trouble
Even Situation:
Even Situation:
Earnings = Spending ===> No Saving ==> No room for capital expenditure
Favourable Situation:
Earnings > Spending ===> Savings ==> Investments ==> Availability of Capital
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