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Financial Budget

Financial Budget

Budgeting is an integral part of financial management and goes a long way in effective decision-making and resource utilization. Particularly, financial budgeting helps in tracking and managing personal expenses, preparing for life’s unpredictable events, and curbing the chances of going into debt; hence, it provides greater control over one’s finances. In this light, a budget becomes a key systematic economic practice and an instrument by which financial resources are distributed to achieve time objectives in the forthcoming period. This 3-part financial budget assumes the sources of revenue to be from my parents and off-campus job and is based on meeting my current needs and long-term objectives, which include attaining my financial needs in 10 years and financial needs at retirement and beyond. Worthwhile assumptions are also listed at each stage.

Meeting Current Needs

This section of the financial budget assumes that I received $1,000 from my parents and $700 from an off-campus job. The list below contains my absolute necessities estimated as monthly expenses.

Table 1: Estimated Monthly Expenses and Estimated Expenditure

Current Needs Expenses Budgeted ($) Actual Cost ($) Comments
Rent $540 $540 Rent is a fixed expense
Utilities $25 $21 Utilities will vary but will not go beyond $25
Groceries $150 $100 I plan to spend more on groceries to offset the large amounts I usually spend on eat-outs.
School expenses $30 $25 School expenses will vary but will not exceed $25
Clothes $75 $80 I plan to reduce my expenditure on clothes
Internet provider $20 $20 Internet is a fixed expense
Transportation $ 20 $18 Transportation usually varies but does not go above $20
Eating out $250 $300 I plan to eat many times at home to minimize the money I spend on eating out.
Personal care $25 $30 I will not spend much on my personal care this time around
Entertainment $100 $90
Savings $150 $150 This is a fixed expense
Miscellaneous $150 $250 I also plan to minimize costs associated with miscellaneous
Total $1,535 $1,680 I will be within the budget if the current expenses are treated as they currently exist.

Although my current expenses are within the budget, I still want to save more. As such, I will adopt the 50/20/30 Budget Rule, which posits that the after-tax income is allocated for expenditure such that 50% goes to the current needs, 30% to wants, and the remaining 20% is channeled to savings (Mazko, 2020). In the first case, the current needs entail the current needs that I must fulfill and ultimately necessary for my survival. Essentially, the rule argues that half of the after-tax income (50%) should cover all the current needs and obligations (Mazko, 2020). Therefore, under this arrangement, I will have to downsize my lifestyle at school and cut down on the expenses to reduce my current expenditure. I will equally cut some expenses in terms of wants (30%) since they are not essential. This means bracing up for a less enjoyable and entertaining lifestyle at school. As a result of the forbearing undertakings, I will be better positioned to sock away 20% of my total monthly income into savings.

Meeting Financial Needs 10 Years Out

This section assumes that before the window period of 10 years elapses, I will have graduated college and worked as a professional employee. Also, part of this period will be monthly student loan repayment. Additionally, the budget assumes a baseline after-tax salary of $2,700. Thus, putting funds toward areas of my budget implies that I need to estimate my potential expenses within the period above.

Table 2: Estimated Monthly Expenses and Estimated Expenditure in 10 years out

Monthly Needs Expenses in 10 years out Budgeted Actual (per the current market conditions) Comments
Mortgage Payment $550 $550  This will be a fixed expense
Car payment $200 $200 This will be a fixed expense
Insurance $75 $75 This will be a fixed expense
Groceries $191 $180 This will vary but will rarely exceed $191
Child Care $200 $200 This will be a recurring and a fixed expense
Student Loans $427 $427 This will be a fixed expense
Savings $300 $300 This will vary according to the monthly expenses and other unpredictable conditions.
Utilities $155 $150 Utilities will also vary according to future situations, both in the house and on market conditions.
Pension Plan $50 $50
Gym fees $50 $50 Gym fees will vary according to circumstances
Internet Services $30 $30 Internet services will be a constant expense
Dining Out $55 $50 This amount will also vary in line with unanticipated events
Miscellaneous $30 $25 The amount of Miscellaneous is also expected to vary depending on the monthly expenditure but below $30
Total $2,313 $2,637

As can be seen in Table 2, the total monthly expenditure in 110 years out is slightly within the budget, calling for improved financial management. As with the “current needs” budget, this budget would adopt a 50/20/30 Budget Rule to help manage my after-tax income, primarily to have savings for retirement and have funds on hand for emergencies. Other than these reasons, the rule would come in handy in prioritizing the creation of a personal fund to cushion against unforeseen monetary events, such as an unanticipated medical condition or job loss. For these reasons, I will maintain the fixed expenses and minimize the varying expenses that would play an essential role in directing funds to more critical areas, as mentioned before. Ho (2018) advises that channeling revenues to more important areas is the prerequisite of budgeting and effective performance budget management. Notably, I would reduce utilities, gym fees, and dining fees. To achieve these milestones, I would reduce spending the after-tax income on needs that are not absolutely essential, strive to train in the house, and eat more food in the house, respectively. Additionally, I would ensure that I use my income as planned and rethink my priorities to spend per the budget restrictions.

Meeting Financial Needs at Retirement and Beyond

The primary assumption at this life stage is that I will stop getting a steady income flow and, at the same time, will not be receiving health coverage. This state of affairs makes a financial budget even more important since I could go overboard and spend all the fruits of my labor in a few years. Meanwhile, I also assume that my income will most likely be coming from my savings, pension plans, and Social Security because of retirement. Therefore, I will opt for reduced benefits to do robust financial planning even beyond retirement. This budget assumes a monthly after-tax income of $2,950 from the source mentioned above.

Table 3: Estimated Monthly Expenses and Estimated Expenditure at retirement and beyond

Monthly Needs Expenses in Budgeted Actual (per the current market conditions) Comments
Medicare $575 $575 The Cost of health wellness will be fixed and recurring
Transportation $600 $600 Transportation costs will be fixed and recurring
Cash Contribution $231 $200 Cash contribution will vary according to the beneficiaries but will be below $231
Food $420 $400 This amount will vary but will not exceed $420
Utilities $75 $75 The Cost of utilities will virtually be fixed
Housing $500 $500 Housing payments will remain fixed
Entertainment $265 $265 The Cost of monthly entertainment will be fixed
Miscellaneous $100 $100 The Cost of monthly Miscellaneous will also be maintained at $100
Total $2,766 $2,746

From Table 3, the expenses are slightly lower than the income. Ideally, the amount will be enough to maintain my standard of living. After all the deductions, retirement plans, and deductions, I will not have to dig deeper into my pocket to pay out critical expenses. Instead, I would enable myself to spend the surplus amount on other valuable projects. The prepared budgets are surplus where profits are anticipated. Therefore, retirement being an event and a process, the benefits and savings will have to cover expenses that emerge during old age. On the other hand, expenses in each stage depend on how I choose to spend my time, where I decide to live, and how my health fares afterward.


Ho, A. (2018). From performance budgeting to performance budget management: theory and practice. Public Administration Review78(5), 748-758.

Mazko, M. (2020). Family budget — Nature, premises, and benefits. The main budget rules (pp. 127-129). Retrieved from


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Financial Budget

This week you will be creating a 3-part budget, where you identify and plan the meeting of your financial needs at the following stages of your life:

Financial Budget

Financial Budget

  1. meeting current needs
  2. meeting financial needs 10 years out
  3. meeting financial needs at retirement and beyond

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