When it comes to budgeting, a specified time duration determines the type of budget being used. Inherently, whether you choose to go with a monthly budget or its yearly counterpart - the choice is completely yours.
It all comes down to planning and setting goals. Managing money is an essential part of life, regardless of what the effort is for. For instance, budgeting can be in the context of running a business or even managing your household expenses.
Nevertheless, each type of budget purports different things, and while setting a monthly plan may be the better option for you, it doesn’t necessarily have to be the same for someone else.
Usually, businesses and corporations opt for annual budgets, as they allow for more foresight and flexibility to prepare for the upcoming financial year. Contrarily, individuals may tend to go with the 30-day type financial scheme because salaries are paid on a monthly basis. Thus, projecting the use of personal finances becomes dependent on the time income is expected.
How yearly and monthly budgets are different
However, when it comes to budgeting, not everything is simple. And, it isn’t just about subtracting expenses from your earnings. You need to prepare according to the type of budget best suits you. The duration of your savings plan can impact certain variables you need to consider, for successful planning.
For starters, when talking about a yearly budget, you need to factor in a range of unprecedented incidents, that may lead to unexpected expenses. This form of contingency is crucial because unforeseen circumstances cannot be ruled out. If you overlook unanticipated events, your planning can take a detour, leaving you with very little funds to spare.
For the most part, it is the uncertainty that separates the two types of budgets. Naturally, the probability of unplanned expenses is much shorter with a monthly budget. Which is why saving up follows different approaches as well.
Your scope of planning is directly proportional to the magnitude of expected savings, and in turn, where you intend to spend the money. Think about it this way, you earn $6000 every month, and your expenses amount to $4000 – more or less. You want to save $2000 each month, but you know this figure will be affected by further costs that you possibly can't account for before they occur.
So, you decide to set aside an additional $500 for the cause, leaving you with $1500 in monthly savings. Now, notice what you missed out. Such a standard plan assumes that your expenses will stay the same for each month. Maybe some time down the line, you’ll have to make a hefty payment, which will set your savings back by thousands of dollars. Thus, annual budgets are relatively less flexible and leave little room for adaptation, and that's why it can be hard to stick to them.
Why you should invest in a budget planner book
Money management is important and, in any case, you should think about investing in a budget planner book. The latter helps record your income and expenses throughout whatever period you choose to go with. It is divided into periodic sections; whereby, you can itemize and plan for the future.
The advantages of keeping a budget planner more than outweigh the problems of trying to survive without one. For example, jotting down necessary details in an organized format provides seamless planning, compared to mental notes and hit-or-miss projections.
You can be extremely efficient as an individual and still forget important things now and then. With budgeting, however, such human error can lead to unpleasant outcomes. Don’t be fooled, while it is rare to forget large amounts of expenditure, dismissing seemingly meager cash outflows consistently can pile up into a lot of money.
In 2020, you can even get a virtual budget planner book to get the job done. You may think the paper is outdated, and that’s alright. In fact, physical books are prone to damage and loss. And besides that, keeping track of a physical budget planner can be tiresome. Hence, a digital budget planner book can make your life easier in numerous ways.
Nobody forgets their phone in the 21st century - technology has become an indispensable companion for everyone, and what better way to integrate money management than to have it at the touch of your screen?
If you’ve decided to budget your money, rest assured, you’re on the right track. Being prepared in terms of personal finance is always pragmatic, as it helps you realize the bigger picture. Just make sure to pick carefully between a monthly or a yearly budget. Each has its perks, but only one will be better suited to your needs. If you seek more flexibility, you should opt for short-term 30-day budget plans, if not, a yearly budget would be best.