The Mechanics of Budgeting: Inflows, Assigning And Outflows

Inflows and outflows

Money is like breathing. Breathing consists of inhaling and exhaling. Similarly the money process consists of earning money(inflow) and using that money(outflow).

When we budget, we divide the inflow of money into various sub divisions. This is the process of assignment. This is the core of budgeting. Then when we spend the money, we record how we spend each penny and then track your spending against your plan.

So,

  • Inflow: Money that we get
  • Budget: The assignment of money to various jobs it has to do.
  • Outflow: Money that we spend.

The inflow part is usually easy as for most of us we have income that comes once or twice a month. If you are running a business, then the inflow can be variable and that needs to be tracked as well.

The budget part is how we divide the inflow into various parts. This division is personal but in most cases will consist of the same broad general categories.

The outflow part is what we spend. The important thing about this part is that we often spend money but do not record where or how we spent it. A key part of successful budgeting is to track every penny that you spend. How you track it is not important.( notebook, digital, etc). But you have to track it religiously. This will help you be aware of your money spending and to formulate a realistic budget and see where you are spending money unnecessarily.

Well, this is a simple summary of the ins and outs of inflows, outflows and the budgeting process. I hope this was useful

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s