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Budgeting: The Importance of Financial Planning

Learn about budgeting, the process of creating a financial plan to estimate revenues and expenses. Discover the benefits of budgeting in determining financial stability and making informed financial decisions.

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Budgeting: The Importance of Financial Planning

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  1. Part A: Budgeting

  2. What is a Budget? A budget is a plan for money, estimate of expected revenues and expenses for the future. Helps to determine if you can save or need to borrow money, or whether you need to consider other financial changes.

  3. What makes up a budget? Revenue: ‘money in’, income, money received Expenses/Expenditures: ‘money out’, outflow of money, cost, payment for goods and services

  4. What is a balanced budget? A balanced budget is when your revenue and expenses match exactly. Revenues – Expenses = $0

  5. Other Possibilities: Surplus: excess, when revenues exceed expenses, positive balance (+) Deficit: deficiency, when expenses exceed revenues, negative balance (-)

  6. What is a debt? When your expenses exceed your revenues (deficit), you will need to borrow money. The amount owing on borrowings is called a debt.

  7. Debrief The budgeting process is an integral part of financial management for individuals, businesses, organizations and governments. This fiscal plan allows for the development of strategies for saving, borrowing and spending.

  8. Discussion What would happen if people, businesses or the government failed to budget their finances?

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