Learning About Different Types of Budgeting

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Business and Personal Budgets

Budgeting is simply the creation of a plan to properly manage money. A budget usually covers a period of time; for instance, a one-year or five-year budget plan. It helps in the monitoring of cash flow, so debt will be greatly reduced or totally eliminated.

What are the different types of budgeting? There are different types of budgeting depending on the use of the budget. For business use, business budget types could come in the form of capital budgets, operating budgets and cash budgets.

Capital Budgets

Capital budgets pertain to the allocation of money for investments and assets of the company. Operating budgets are needed for the operational goals of the business such as the how much money to be allocated for the total operating expenses or determining the profit goals within the year. Cash budget refers to the cash flow of the business – the cash in and cash out allocations.

Types of budgeting, however, do not only cater for business use alone. Another way to address the question ‘what are the different types of budgeting’ would be to include the personal budget types. These budget types are directed towards the expenses and income of the family or even an individual. The type of budgets that fall under personal budget are: Envelope Budgeting and Spreadsheet Method.

Envelope Budgeting

Envelope budgeting is so-called because money is allocated by making an envelope for each expense that is normally incurred each month such as electricity or phone bills. The most common budgeting type, however, is the spreadsheet budget. In a standard spreadsheet, the expected income for the month is put at the top and then expected expenses are subtracted from it. To do this in reverse, one can compute the total expenses in order to determine how much income the individual or family must come up with in order to cover all expenses.

Knowing the different types of budgeting greatly simplifies the budgeting processes for both company and personal use. Having a budget could help one achieve optimal use of their money and the resources at hand. Budgeting is very important for making sure that you do not get your family into debt that you cannot get out of in a simple manner.