budget allocation works

What Is Budget Allocation and How to Allocate Budget Correctly

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George Fullerton

Strategy & Operations

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Your budgeting process  requires strong collaboration from department heads and executive leadership. Yet if you’re only going to each department once, asking them what they need, and simply saying, “Here you go” once you get executive approval, then you haven’t done enough testing around your top-line goal metrics.

If you want to pave a path toward sustainable growth, you need to embrace agility and proactivity — and one way to do that is through budget allocation. Running a budget variance analysis  and rolling forecast  helps you set baselines and growth goals, but these processes can still take weeks to gather and manipulate data from multiple departments and source systems.

Here, we explore how quarterly budget allocation creates a path for more agile, strategic planning and spend.

Table of Contents

What Are Budget Allocations?

Budget allocations refer to the amount of money each department receives from the general fund to execute their strategic plans. Budget allocation breaks department spend down into an approved maximum amount each department can spend per resource, whether it’s on software, contractor or freelance assistance, or ad spend for a marketing campaign.

The Importance of Allocating Budgets

Budgeting, at its core, is an optimization and constraint problem. You need to optimize operational efficiency yet understand your constraints to ensure ample runway and team support as you track the company’s growth trajectory.

You dictate the company roadmap based on expected return on investment (ROI), which has to tie out at the department level. The R&D department is integral for Seed and Series A companies, yet once the product is ready to launch, you want to allocate budget to your sales and marketing teams. Once the budget goes toward sales and marketing, and you begin acquiring customers, you now have new constraints that impact your budget: your customer acquisition cost  (CAC), CAC payback period , and your annual recurring revenue  (ARR).

Budget allocation fuels overall efficiency, in that department leaders don’t need to ask for approval to expense individual tools, assign projects to freelancers, or add seats for software. By allocating budget to general categories, each department can cherry-pick when and how to apply the budget. Of course, departments need to ensure they use their budget. While saving money is generally seen as positive, departments may not receive the same budget allotment in the next cycle — which may be detrimental to department-level goals and planning.

If departments experience strain, such as requiring more seats on a specific tool or running into production issues, you run into employee retention issues that stem from operational efficiency and satisfaction. To hire more employees costs more, which digs into your runway. By keeping an eye on your goals and constraints, you can then proactively figure out where you’ll get the highest ROI.

How to Optimize Budget Allocations in 6 Steps

Knowing your startup costs (for each employee and desk space), fixed costs, and variable costs and how they impact your total budget is one thing — but to optimize budget management and allocation requires ample cross-collaboration to keep goals top of mind and realistic.

Your budget allocation strategy will depend on your industry, your growth stage, and overall macroeconomic environment. But here’s how you can optimize your budget allocation with more strategic and agile decision-making from everyone involved regardless of stage.

1. Set Company Goals and Priorities

While knowing your total budget is technically the first step, the real strategic insights begin with a simple question: What are your North Star metrics?

Naming your company goals and priorities is the key to driving how you think about and create departmental budgets across the company.

In ideal market conditions, many executive leaders say that their top priority is to grow at all costs. Yet during a market downturn, priorities shift toward keeping a closer eye on burn and preserving runway. Depending on how those priorities shake out, there’s two ways to approach budgeting:

  • Growth goals: A focus on growth goals requires high confidence in achieving them. Your growth goal is the starting point, then you work backwards to allocate your budget to achieve that goal. A focus on top-line revenue growth leads to creating a sales and marketing budget around cost per lead and win rates/conversions. The question becomes “How much do I have to spend in order to get this growth goal?” which then spits out your sales and marketing budget.
  • Capital efficiency :  A more conservative approach begins by asking, “How much can I spend in order to only burn X number of dollars a month, or to make sure I have runway for 24 months into the future?” You can also focus on a certain set of unit economics, meaning you’d build your budget to hit a particular CAC number or set a payback period within a particular period of time.

Regardless of your approach, tying your budget back to goals (i.e. strategic budgeting ) and target metrics is critical. If you believe growth goals are most important, for example, then your ROI on spending additional sales and marketing dollars could be higher than hiring a different engineer where you may have a longer-term payoff.

2. Set Your Constraints

Your goals establish whether you’re approaching budget allocations from a bottom-line or top-line growth  perspective. Utilizing both allows you to gain a sense of customer retention (with your top line) alongside expenses (bottom line), which helps you strike the right balance or priorities. Applying constraints to your goals allows you to set realistic expectations.

Company-wide, you want to keep an eye on runway and burn multiple. Yet when diving deeper into department budgets, you’ll need to focus on different metrics. For example, CAC payback period impacts your sales and marketing budget.

Your CAC payback period sets a precedent for how long potential customers stay in the sales funnel. Incorporating sales funnel metrics into this equation provides invaluable insights — and setting constraints around your payback period requires sales and marketing to scrutinize and optimize these metrics within the funnel.

3. Check Your Goals Around Budget Allocation Benchmarks

Your company’s growth stage impacts where your goals and constraints stay relevant and applicable to ensure strategic growth. OpenView runs a SaaS Benchmarks Survey that explores budgetary benchmarks in correlation with your growth stage. Here’s their chart from 2021:

openview financial and operating benchmarks by ARR chart

OpenView SaaS Benchmarks Survey 2021 Results, courtesy of Curtis Townshend , Senior Director of Growth at OpenView.

The top row indicates the stage of the business per million dollar revenue. The numbers in bold represent a median, with percentages assigned for how much each company would allocate per category. For example, a company with $1-2.5 million in revenue would allocate 30% of their budget to sales and marketing and 40% in R&D, while aiming for 75% in gross margins.

While the above table does not mention a ratio for general and administrative costs , the standard spend for SaaS companies is about 10-12% of your total budget.

After you establish your goals and constraints to ensure financial efficiency , you can approach your budget and measure against these benchmarks.

4. Establish Your Headcount Plans

Headcount accounts for 70% of overall company spend in SaaS, and each department has different ROI.

Sales and marketing headcount should directly produce returns — but to drive the sales and marketing machine, you need to continuously spend. You need to ensure you have a strong control and understanding of your product-market fit to keep the engine running. If the company is not at the point of understanding the output of each dollar spent across the sales funnel, the budget should focus on product or internal system process data.

Work closely with human resources partners to decide how much to set aside for workforce growth in every department. Decide how many full-time hires you’ll need in the next budget year, where it might be appropriate to hire out to contractors, and where your stakeholders need the most help.

5. Conduct Scenario Planning with Mosaic

Optimizing budget allocation helps you optimize ROI of operational initiatives by forcing you to constantly check where you think you’ll get the most out of your dollars and how that spend relates to company-level goals.

Mosaic’s financial modeling and scenario planning tool integrates with your source systems to offer scenario analysis that elevates the strategy behind your budget allocation. Scenario analysis examples  include looking at how cutting a fixed cost (like office space) impacts your runway, or how your product release plan may hinge on engineer headcount or come down to asking, “ How much should you spend on ads  to promote the product — and when?”

Being able to quickly see how adjustments to specific budgets affects your downstream metrics is extremely helpful. Mosaic syncs in real time so you can easily integrate your historical and actual data into your scenarios. If you want to see how increasing spend by $500,000 impacts your sales and marketing budget, you can simply apply the change in one model to see how it affects your CAC, CAC payback, burn multiple, and other key metrics.

You don’t need to build entirely new models or scenarios — instead, you can tweak your budget assumptions in different scenarios and see the immediate downstream effects on the metrics that you want to employ as your constraints.

Keep in mind that your strongest models align on two or three metrics: Too many inputs leads to an overlap in ideology, which causes clutter and slows you down.

6. Make Cross-Department Collaboration a One-Stop Shop

The budgeting process is notorious for multiple Excel sheets and communication across multiple emails or Zoom meetings. Mosaic allows you to create department-level dashboards that align leaders and give them one place to stay updated on budget allocation and spend.

department level budgeting dashboard in Mosaic

Department leaders can look at a graph or table in Mosaic’s variance analysis software to see where their budget currently is and where it was spent. Mosaic can immediately generate a budget analysis that allows them to make strategic decisions on what they want to do with their remaining budget or where they need to cut back to hit their budget for the month or quarter.

Mosaic also allows reports to be easily accessible for department leaders. Since Mosaic offers real-time updates, finance teams can help establish one report that automatically updates so department leaders can make plans with actual numbers. This leads to not just saving time between going back and forth to establish numbers, but more proactive decision-making that keeps leader engagement high into understanding the “why” behind their budgeting line items.

Focus more on telling the story behind your numbers with this Financial Waterfall Template Bundle.

When to review budget allocations — and why you’re not doing it enough.

A “one and done” annual budget process doesn’t work for high-growth companies. A more adaptable or flexible budget approach is essential, especially for those experiencing rapid changes. Keeping it to even twice a year causes everyone to miss out on key drivers for overall success. Proactive budget development should happen at least on a quarterly schedule, where you can change resource allocation based on historical data from the previous year to last quarter.

While establishing a quarterly financial plan review is good in practice, you also need to allow for some flexibility. Here are some other reasons to perform financial audits on budget allocation:

  • Macroeconomic events. Anything from a market downturn or industry collapse signals immediate action. Budget allocation should transition into a monthly schedule to stay as ahead as possible.
  • Not hitting topline goals. You may need to redistribute your budget to ensure you get as high of an ROI as possible. You may need to allocate more budget toward supporting sales and marketing than hiring another engineer, for example.
  • Runway cost. If you predict that you’ll burn $5 million, but realize that headcount needs to increase in the second half of the year, you need to factor that cost in. You also need to keep track of your burn and when it occurs: If it increases from $2 to $3 million in one month due to headcount, you carry this cost throughout the rest of the year. You can then take budget away to make up the costs — it’s much harder to try and get the budget back once people start spending it.
  • Capital efficiency metrics are off. Analyzing capital efficiency  metrics like burn multiple  on a regular basis can help you proactively address inefficiencies in the business. Drill down into your expenses and see how you can reevaluate spend.

Embrace a Smarter Way to Allocate Budgets with Mosaic

Mosaic offers preloaded, out-of-the-box metrics, templates, and dashboards that allow you to cut the budget allocation and planning process from two weeks to two days. Mosaic offers a SaaS acquisition metrics dashboard that considers CAC and CAC payback alongside other important metrics, like your SaaS magic number , to gain granular insights that craft your company’s growth narrative. You can also customize financial reports to include other key metrics, such as your burn multiple and runway, to help establish and keep your benchmarks in mind.

With Mosaic, budget planning can be a quicker, more collaborative, strategic process that keeps your company moving along toward its goals. Request a personalized demo today .

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Budget allocation FAQs

Why is budget allocation important.

Understanding your budget allocations and appropriations can help your company maximize ROI. Knowing where your money goes ahead of time reduces discretionary spending and leaves a strategic roadmap for spending and expenditures . And, since this is done ahead of time, departments can run more efficiently on their allocated budget.

What is an example of a budget allocation?

An example of budget allocation is a predetermined percentage of company funding that goes to research and development, or sales and marketing. This can be done monthly, per quarter, or per fiscal year . The percentage of the allocated budget is based on importance, productivity, company profits, and other considerations. If the department needs more funding, they can submit a budget request , but ultimately, the budget allocation should be taken care of beforehand.

What is the best way to allocate your budget?

There’s no one-size-fits-all answer here. To optimize your budget allocation you need to proactively and periodically review how you’re allocating resources and reassess your priorities. What are your goals? What are your budget constraints? What ROI are you getting on your current allocations? These are all questions you need to ask in collaboration with different teams and departments to ensure your budgets are allocated properly at all times.

Related Content

  • The 12 Most Important Operational Metrics & KPIs to Track in SaaS
  • How To Choose the Best Pricing Model for Your SaaS Business
  • What Is Spend Forecasting and How Can It Benefit Your Business?

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  • Financial Planning

The 50/30/20 Rule of Thumb for Budgeting

Elizabeth Warren's 50/30/20 rule can help you manage your budget

What Is the 50/30/20 Rule of Thumb?

  • Where the 50/30/20 Rule Comes From
  • How to Use It for Budgeting
  • An Example of the 50/30/20 Rule
  • Why the 50/30/20 Rule Works

Grain of Salt

  • 50/30/20 Rule vs. Other Methods

Frequently Asked Questions (FAQs)

The Balance

The 50/30/20 rule of thumb is a way to allocate your budget according to three categories: needs, wants, and financial goals. It’s not a hard-and-fast rule but rather a rough guideline to help you build a financially sound budget. 

To better understand how to apply the rule, we’ll look at its background, how it works, and its limitations, and we'll go through an example. In other words, we’ll show you how and why to set up a budget using the 50/30/20 rule of thumb yourself.

Key Takeaways

  • The 50/30/20 rule of thumb is a guideline for allocating your budget accordingly: 50% to “needs,” 30% to “wants,” and 20% to your financial goals. 
  • The rule was popularized in a book by Elizabeth Warren and her daughter, Amelia Warren Tyagi.
  • Your percentages may need to be adjusted based on your personal circumstances.
  • It’s only a rule for how to plan your budget; it doesn’t actually track your budget for you.

The 50/30/20 rule of thumb is a set of easy guidelines for how to plan your budget. Using them, you allocate your after-tax income to the following categories.

50% to Needs

Needs are what you can’t live without, or at least not very easily. They include things like:

  • Utilities, such as electricity, water, and sewer service

30% to Wants 

Wants are what you desire but don’t actually need in order to survive. They might include:

  • Digital and streaming services like Netflix and Hulu

20% to Financial Goals

This category covers two main areas:

  • All savings, such as retirement contributions, saving for a house, and setting money aside in a 529 college savings plan (note that contributions to a 401(k) come from your pre-tax income)
  • Debt payments

Because this is just a guideline for planning your budget, you’ll need to supplement it with something to monitor spending, such as a budget tracker like YNAB (You Need a Budget), Mint, or Quicken. You can then set the 50/30/20 percentages as targets within whichever budget tracker you prefer.

Where Does the 50/30/20 Rule of Thumb Come From?

The 50/30/20 rule was popularized by Senator Elizabeth Warren (a Harvard law professor when she coined the term) and her daughter, Amelia Warren Tyagi, in the book All Your Worth: The Ultimate Lifetime Money Plan . It was designed as a rough rule of thumb for working-class families to plan their spending in order to prepare for the future and unforeseen circumstances.

How to Use the 50/30/20 Rule of Thumb for Budgeting

Most people save too little, and unknowingly spend too much. The 50/30/20 rule of thumb is a way to become aware of your financial habits and limit overspending and under-saving. By spending less on the things that don’t matter that much to you, you can save more for the things that do.

Here’s how it works:

  • Calculate your monthly income: Add up how much you receive in your bank account each month. If you have a workplace retirement plan, find out how much is withheld, and add that amount back in with your take-home pay. If you pay estimated taxes, reduce your monthly income amount accordingly.
  • Calculate a spending threshold for each category: Multiply your take-home pay by 0.50 (for needs), 0.30 (for wants), and 0.20 (for financial goals) to see how much you should ideally spend in each category. 
  • Plan your budget around these numbers: Think of these three categories as “buckets” that you can fill with monthly expenses . List and tally your monthly expenses under the category that each falls into and see whether you’re spending less than the monthly targets you established in the prior step.
  • Follow your budget: Track your expenses each month, and make changes where needed, in order to stick to your spending thresholds going forward.

An Example of the 50/30/20 Rule of Thumb

Here’s an example using the steps above:

  • Calculate your monthly income: Let’s say you and your spouse have a total of $4,787 deposited into your bank account each month from your jobs. You both check your pay stubs and see that a total of $532 was taken out for 401(k) contributions . This means that together, your monthly income is $5,319 ($4,787 + $532).
  • Calculate a spending threshold for each category: Based on the 50/30/20 rule, the amount you should allocate to “needs” is $2,659 ($5,319 x 0.50). The amount you should allocate to “wants” is $1,596 ($5,319 x 0.30). The amount you should allocate to financial goals is $1,064 ($5,319 x 0.20). Since you’ve already contributed $532 to your 401(k)s, use the remaining $532 to pay down debt or save for other financial goals.  
  • Plan your budget around these numbers: Go through your budget to either plan out your spending or see how well it is already aligned with these targets. 

Why the 50/30/20 Rule of Thumb Generally Works

Figuring out your finances is confusing, and it’s often hard to know where to start. That’s one reason the 50/30/20 rule of thumb works so well: It’s an easy way to get a handle on something that can otherwise be intimidating.

Even if you don’t take it any further by tracking how well you stick to these targets, it’s still a good way to take your financial pulse .

Like any rule of thumb, it’s a good idea to take the 50/30/20 rule of thumb with a grain of salt.

Potential for Gray Areas

It’s sometimes hard to sort out your spending according to three categories. Everyone needs to eat, for example, but some groceries fall into the wants category (like sugary sodas and unhealthy snacks). 

Can Be Difficult for Low-Income People

If you’re earning just enough to make ends meet, you may struggle to save 20% of your income regardless of how you live, especially if you’re supporting a family. 

Savings Might Not Be Enough

On the flip side, if you have big goals, like retiring early or buying a house in a high-income area, 20% might not be enough. 

For example, the average home price of a house in San Francisco was more than $1.6 million in June 2022. You would need to save, on average, $320,000 to afford a 20% down payment there.

You Still Need to Track Your Budget

The 50/30/20 budget rule is only one piece of the budgeting puzzle. It’s good to shoot for these percentages, but unless you track your spending, you’ll never know whether you’re actually hitting them. 

The 50/30/20 Rule of Thumb vs. Other Budgeting Methods

The 50/30/20 rule of thumb isn’t the only game in town. Here are a few other budgeting techniques that might work better for you:

  • The 80/20 Rule: With this method, you immediately set aside 20% of your income for savings. The other 80% is yours to spend on whatever you want, with no tracking involved. 
  • The 70/20/10 Rule: This rule is similar to the 50/30/20 rule of thumb, but you instead parse out your budget as follows: 70% to living expenses, 20% to debt payments, and 10% to savings.

How does tithing figure into the 50/30/20 rule?

As with any rule of thumb, you'll need to adjust it to fit your specific circumstance. When it comes to tithing or any other religious expense, individuals can decide for themselves whether that's something they "want" or "need."

Where does credit card debt go in the 50/30/20 rule?

Paying down debt is considered a financial goal. That means you should allocate 20% of your budget toward some combination of paying down debt and saving for the future.

How much of your paycheck should you spend with the 50/30/20 rule?

The 50/30/20 rule doesn't specify how much of each paycheck you should spend. The percentage of your paycheck that you spend or save largely depends on the 20% financial goal category. If your main financial goal is to reduce debt, you'll be spending more of your paycheck on that. If your main financial goal is to save up an emergency fund, then you'll be saving more of your paycheck.

Zillow. " San Francisco Home Values ."

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Finance Alliance

13 effective tips to allocate budget across departments

Sabrinthia Donnelly

Sabrinthia Donnelly

To build a sustainable and profitable business, you need to know how to allocate budget across multiple departments.

As you can imagine, this can be a tricky process to get right. Everyone wants a bigger piece of the pie, and you can’t always please everyone. Instead, you must find a way to balance competing priorities with overarching business objectives – all while forecasting future needs.

So, how can you do that effectively?

This article highlights 13 tips for successful budget allocation across departments and covers: 

  • What we mean by ‘budget allocations'
  • Why companies need to budget
  • How to allocate budgets
  • Roles responsible for budget management

13 tips to allocate budget across multiple departments

  • How to allocate marketing budgets
  • What types of budget allocation can be changed

How to create a budget allocation model

What are ‘budget allocations’.

Budget allocation is the process of designating specific amounts of money to each department within a company.

How much money each group receives depends on:

  • Company priorities
  • Revenue projections
  • Departmental needs

These allocated budgets set spending limits for each department's operational costs, including:

  • 🖥️ Software
  • 💬 Marketing campaigns
  • 🛠️ Equipment
  • 📈 Projects tied to their goals

Done right, budget allocation provides clarity on available funds and is used to monitor spending.

Why do we need budget allocation?

The purpose of budget allocation is to guide spending and distribute financial resources.

It won’t come as a surprise to learn that most businesses have limited budgets. As much as you’d like to give every department the freedom to spend as much as they want, that's just not realistic. Budgets force departments to prioritize their needs and allocate resources efficiently. Without budgets, costs would likely spiral out of control and lead to overspending.

Some more reasons why budget allocation is so important include:

  • Financial control
  • Optimal resource use
  • Risk mitigation
  • Strategic alignment
  • Operational efficiency

But what does ‘successful budget allocation’ look like?

How do companies allocate budgets?

Many companies start with an analysis of historical spending and revenue patterns . They’ll collect financial and operational data from all departments and use key performance indicators to help guide decisions.

Company-wide objectives and initiatives are confirmed by leadership to help construct budgets that align with those goals.

Collaboration is very important and you may find that you’ll work closely with department heads and other stakeholders to better understand their monetary requirements, operational challenges, and strategic importance.

From there, you may employ a certain budgeting methodology such as:

Different types of budget allocation

Each offers a unique approach to budgeting. The next step is to draft a preliminary budget , which will be reviewed by senior management. You may need to revise the budget plan before it's implemented.

Larger, more complex companies often take a bottoms-up approach – gathering proposed budgets from departments first. Small companies may use a top-down allocated amount to each group.

It’s worth noting that budget distribution can occur as a single annual allocation or be staged across the year.

Who is responsible for budget management?

Typically, budget management involves multiple roles and stakeholders within an organization, such as:

  • CFO - The Chief Financial Officer is ultimately responsible for high-level budget strategy, financial planning, and oversight of the overall budget. This holds true across multiple industries with McKinsey reporting that 72% of CFOs say they're the most involved executives in allocating financial resources.
  • Finance Department - The finance team manages day-to-day budget tracking, reporting, analysis, and controls. They also develop budget allocation models and processes.
  • Department Heads - Leaders of business units are involved in budget requests, planning, and managing budgets for their departments.
  • Controller - The controller plays a key role in budget control and variance analysis and often enforces compliance with budgets.
  • Budget Analysts - Analysts assist with budget forecasts, data analysis, and preparation of budgets.
  • Project Managers - Project leads maintain budgets for specific projects and initiatives.
  • Executives - The CEO, COO, and other executives weigh in on high-level budget direction aligned to business strategy.

While the CFO may be the ultimate budget owner, effective budget management requires collaboration across these different roles to develop, track, control, and optimize budget performance.

Here are 13 tips for effectively allocating budget across multiple departments.

1. Involve department heads in the budgeting process

Have them provide input on their resource needs and strategic priorities. This buy-in helps to create shared ownership.

2. Employ a standardized approach

Implement a standardized budgeting process throughout the company to maintain consistency and fair allocation while considering each department’s unique needs.

3. Analyze historical spending

Search spending history to help identify trends and seasonal fluctuations. Use this data to forecast future budget needs.

4. Set organization-wide goals and communicate strategic priorities

Departmental budgets should align with these overarching objectives. This alignment not only ensures financial coherence but also enhances operational synergy.

5. Tie budgets to realistic forecasts

Allocate the budget in the context of revenue projections, not last year's numbers. By aligning budgets with realistic forecasts, you’ll ensure a more adaptive and forward-looking financial strategy positioned to navigate through evolving market conditions and emerging challenges.

6. Reserve a percentage of the total budget for discretionary spending

This buffers against unforeseen expenses arising mid-year. Reserving some of the budget for a rainy day could prove to be vital for mitigating risks and safeguarding against financial strain.

7. Prioritize ROI-driven activities

Allocate more significant budget portions to departments or projects that exhibit higher Return on Investment (ROI), ensuring funds are applied in areas that create value.

8. Require departments to justify requests exceeding historical allocations

Scrutinize large variances before approving. This helps ensure that any significant deviations from past spending are thoroughly vetted and aligned with strategic objectives.

9. Stage budget distributions

Granting each department funds quarterly or monthly versus upfront. This improves oversight. Plus, allocating budgets in installments rather than lump sums allows closer monitoring of spending patterns and burn rates.

10. Establish policies on budget transfers between departments

Policies that allow flexibility while maintaining control enable resources to be shifted to higher-priority needs when necessary.

11. Compare the allocated budget to actual spending and hold department heads accountable

Regular check-ins on budget versus actuals reveal if departments are lagging or outpacing their plan. It’s also important to hear from department heads so that actuals vary from the budget by higher than expected, they can explain, and you can analyze root causes together.

12. Leverage technology

Implement budget management software and analytical tools to streamline the allocation process. If done right, technology can help ensure accurate tracking, and provide actionable insights that inform future allocations.

13. Review budgets regularly

Continually track budget usage against set benchmarks and revisit allocations if company priorities shift mid-year. Revising budgets is one of the biggest priorities of modern-day CFOs according to PwC , who say CFOs prefer to work closely with colleagues across the C-suite to adjust budgets and revisit pricing models.

How to allocate marketing budgets across channels

When it comes to allocating marketing budgets across channels, you might find the marketing team asking for your input and advice. Since it’s a common occurrence for many of our finance community members, we thought we’d address it here.

The most effective approach is to start by auditing historical performance data for each marketing channel and assessing engagement, conversions, and attributable revenue or pipeline. Look at both returns on ad spend and overall contribution to goals.

Based on the audit findings, prioritize the budget for the initiatives delivering the strongest results and ROI. Avoid spreading the budget too thin across marginal channels. Consolidate dollars into high-traction initiatives. 

Balance short-term lead generation priorities with longer-term brand-building channels. Seek overall alignment to revenue goals while maintaining ROI accountability. Continuously evaluate new channel opportunities by funding initial tests out of existing budgets.

The key is taking a data-driven approach to fund the right mix of channels optimized for customer acquisition and financial return. And don’t forget to adjust allocations based on results.

Digital marketing budget allocation

For digital marketing budget allocation specifically, focus spending on platforms with the lowest CPA and highest conversion rates per your analytics. 

Then, continue optimizing digital budget allocation based on campaign performance and emerging trends.

B2B marketing budget allocation

When it comes to B2B marketing budget allocation, prioritize high-touch channels like events and sales enablement . 

Ensure a sufficient budget for product marketing and research. Invest in thought leadership content and account-based tactics.

What budget allocation can be changed?

While certain fixed costs like rent and payroll are less flexible, most discretionary spending budgets can be adjusted as business conditions and priorities evolve. 

Areas, where budget allocation is typically more fluid, include:

  • Marketing - Budget can shift across channels and campaigns based on performance.
  • Technology - Upgrades can be accelerated or deferred; new tools funded.
  • Travel - Conferences and other travel can be relatively easy to adapt to needs.
  • Training/Development - Programs can expand or contract as capabilities shift.
  • Contractors/Services - External spending can be reduced or surged as needed.
  • Inventory - Purchases and production can align with demand forecasts.
  • Capital Expenditures - Major equipment purchases can be postponed or funded faster.

A budget allocation model provides a structured framework for distributing financial resources across an organization's departments, divisions, projects, and other entities.

Key components of a budget allocation model include:

  • Revenue forecasts: Projected sales and income provide the spending boundary.
  • Historical data: Prior budgets and actuals inform future allocations.
  • Performance metrics: KPIs help determine departmental budget sizes.
  • Management input: Leaders provide top-down strategy and bottom-up requests.
  • Allocation method: A proportional, incremental, zero-based, or activity-based approach.
  • Policies: Guidelines for transfers, overages, contingencies, and processes.

Revisit and adjust the model regularly based on results and changing internal and external factors. Evolve the model of each cycle.

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Sabrinthia is the Senior Copywriter at Finance Alliance and host of the Two Cents podcast. She's always happy to connect with new people in finance, so if you want to get involved, please reach out!

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The value of a budget allocation plan for businesses

Budgeting is one of the most crucial aspects of any business. However, many companies don't budget "smartly" since they don't have a budget allocation plan. It could be the difference between success and failure in your business. 

What is a Budget Allocation Plan?

A budget allocation plan is a blueprint of how much you can spend on a program, event, person, or product within an organization. Essentially, it is the amount allocated to expenditures, telling staff how much funding is available, and having them to stick to the allocations.

Usually, businesses create a budget by taking into account expenditures, resources, and expenses from each department from the previous year. Identifying the needs, program expenses, and available resources of the company in the coming months can help to allocate monetary resources better. This can boost employees' confidence and productivity.

Overall, the goal of the plan is to account for the monetary resources of a company, thus ensuring money is spent as planned. In other words, the plan keeps the company in check by allowing management members to understand when they are spending too much. 

However,  with only 54% of small businesses having a budget many companies are vulnerable to overspending. So how can a business make a plan that works? 

How to make a plan for budget allocations

A good question to ask yourself is, what is a good budget allocation plan? A good plan entails the allocation of resources. It is a realistic, transparent, and professional approach to an organization's finances. 

The first thing that management and sales teams should do is understand and outline all the expenditures, allocation limits, revenue, and standard budget categories of the last few months or years. By looking at the amount spent on direct costs and indirect costs, the company can account for, limit, or adjust its expenses, thus conserving its resources. 

Some companies keep subscriptions on for many years without using them. Looking back at these costs can help determine overall expenses, determine direct costs, and the assigned expenditure for these services. 

Furthermore, analyzing past spending can help companies form a performance trend to predict expenses and expenditures in the future. After all, if we write an unrealistic budget, no department, employee, or staff member will truly follow it since it just isn't realistic. 

Allocating Budgets across Departments 

You already understand the importance of a budget. But it is crucial that your employees know that the maximum amount of money they can obtain for a fiscal year stays within the allocation plan. Therefore, consider allocating across departments by; 

Determine spending requirements

No allocation plan is as good as facts and figures, so you want to make spending estimates based on historical data. Have each team discuss and provide details. Furthermore, you may find it helpful to consider all business costs, especially fixed costs and variable costs. 

Of course, you may be past the startup stage, but if your allocation plan will be effective, it is essential to include this cost. Fixed costs, on the other hand, are consistent expenses that occur weekly, monthly, or yearly.

For example, salaries, health insurance, travel and subsistence item, etc. The variable costs fluctuate and may be dependent on sales and revenue. For example, your sales team may have to attend a conference, so paying for round trip airfare, and accommodation will increase your personnel expenses for that period.

Since it may be challenging to set a fixed price for variable costs, it is best if you considered buffering this part of your allocation plan (to the nearest hundred or thousand) - to accommodate increments and unforeseen expenses. 

Generating a reliable revenue

It is imperative for companies to have reliable revenue so that they can have a reliable budget. It is also reasonable to have an expenditure line with the maximum amount payable. If a company has an inconsistent revenue source, it is tough to devise a competent way of calculating its budget or predicting overall performance. 

A better way to secure a reliable revenue plan is through long-term contracts and partnerships that yield monthly revenue.

If an organization has yet to have a reliable revenue, it is crucial that the company knows where to make cuts in case of an economic downturn to ensure that the company will not be in the negative. However, if that is not feasible, it is crucial to find new ways to generate reliable funding sources so that they can still continue to survive in the long term. 

Executing your allocation plan 

The first few months after developing an allocation plan should focus on execution. Note that it may be slightly challenging to get used to the changes that come with cutting costs. 

Ultimately, the first few months of execution determine the success of your plan. However, if the company can not follow up with the plan or there has been no change, it may mean that the plan needs changes. An unsuccessful plan may not be a negative. Instead, it should be an opportunity to improve your company.

Monitor the allocation plan

Monitoring the allocation plan is great for accountability, especially with economic inflation. It is essential for the company to look back at the budget allocations every few months. 

Furthermore, recording your spending, expenses, budget allocations, and purchase orders will further promote accountability in the company. This will help employees determine allocated funds per department, what they have spent, and how expensive it is.

It will create a sense of responsibility and accountability and promote an ideal management culture in several organizations. 

Adjusting your allocation plan 

Your plan may not be perfect. Chances are, it won't be. It is not unusual to make some corrections that include fund transfers from one category of the plan to another. This is especially ideal for a category with surplus funds. Adjusting the budget keeps your results in view and prevents the adverse effects of an economic downturn. 

Allocation costs

There are usually two classifications of allocation costs: direct and indirect costs. 

Direct costs

Direct expenses that are directly related to a product or service. These typically include raw materials, personnel, allowance, vehicle costs, holiday pay, services rendered, and more.

These costs are usually very easily traced since they fluctuate with production levels, such as inventory. If a company is doing well, the direct costs are usually higher than before. 

Indirect costs

Indirect costs are not so easily traced. They're "overhead expenses" which cannot be easily traced back to a project or product. A few examples of indirect costs are utilities, premise rent, equipment, security, operation and maintenance, and more.

Indirect costs usually fluctuate quite a lot monthly since they don't tie into how the company is doing. 

Business Budgeting Methods 

Organizations use different methods in determining the best budget for their resources. However, four are common: incremental budgets, zero-based budgets, value proposition budgets, and activity-based budgets. 

Incremental budget

An increment budget reviews last year's budget to determine the current year's performance. It is last year's figure plus or minus the allocated percentage. This method is ideal for any business. A factor to consider in this program is funding and the change in primary cost.     

Zero-based budget

This method assumes that all departments have zero budgets. Each department in the organization must justify its expenses. Money management is good because it avoids non-essential costs and spending. It is an excellent example of when you want to shake things up in your business. 

Value proposition: this falls between incremental and zero-based budget to produce a sweet balance and profitability. It analyzes different expenditures and seeks to; 

  • Understand why a department spends a certain amount of money. 
  • Justify expenses 
  • Determine the value expenditures provided to various departments within the organization.  

Activity-based:

The activity-based budget is prepared based on targets, especially for a newer organization interested in budget allocation and funds maintenance. The activity-based approach promotes performance and is a better way for the organization to allocate its funds. If you don't spend more time analyzing the program, it could prove detrimental to your developing enterprise.  

Overall, a budget allocation plan is crucial for any business. It is a good habit to track and control the costs related to your business and improve the financial health of a company while eliminating wasteful or toxic spending habits.

Your business will enjoy growth when you have a good picture of your finances. Remember that all spending information is relevant in the process. If you need to keep your records safe and accessible, you may consider opting for software.

budget allocation works

Home Blog Strategy Mastering Budget Allocation Management for Finance Teams

Mastering Budget Allocation Management for Finance Teams

Effectively managing budget allocations is crucial for the financial health and sustainability of any organization. Finance teams play a pivotal role in overseeing budget allocation , ensuring that spending aligns with strategic objectives and financial plans. In this article, we explore best practices for finance teams in the realm of budget allocation management.

Regular Monitoring of Budget Allocations

Finance teams should establish a routine for monitoring budget allocations to ensure adherence to the predefined spending plans. Regular reviews enable teams to identify deviations early on and take corrective action promptly. This practice helps prevent overspending and ensures that financial resources are allocated efficiently.

Creation of a Comprehensive Spending Record

Maintaining a detailed spending record is a fundamental practice for effective budget allocation management. This record should encompass all purchase orders and bills, providing a comprehensive overview of financial transactions. By having a centralized record, finance teams can easily track expenditures, compare them against budget allocations, and identify any discrepancies.

Comparison of Spending Against Budget Allocations

A key aspect of budget allocation management is the ongoing comparison of actual spending against the allocated budget. This involves regularly assessing the spending record and identifying areas where expenditures exceed or fall short of the budgeted amounts. This proactive approach allows finance teams to address budget variances promptly and make informed decisions to reallocate resources if necessary.

Promotion of Accountability

Creating a spending record not only facilitates tracking and comparison but also promotes accountability within the organization. Finance teams can use the spending record to verify whether procurement activities were conducted in accordance with established protocols. This transparency enhances accountability among teams and encourages responsible spending practices throughout the organization.

Insights for Future Budget Planning

A well-maintained spending record serves as a valuable resource for future budget planning. Finance teams can analyze historical spending patterns, identify trends, and use this information to refine future budget allocations. Understanding past expenditures provides insights into areas of potential optimization and aids in creating more accurate and realistic budgets.

Highlighting Saving Opportunities

Monitoring budget allocations and maintaining a spending record can uncover saving opportunities for the organization. By identifying areas where expenditures are consistently below budget, finance teams can explore cost-saving initiatives or reallocate resources to areas with higher priority. This strategic approach contributes to financial efficiency and optimization.

Collaborative Budget Review

Effective budget allocation management involves collaboration among different departments and teams within the organization. Finance teams should work closely with department heads and managers to review budget allocations, discuss spending needs, and ensure alignment with organizational goals. This collaborative effort enhances communication and fosters a shared understanding of budget priorities.

In the dynamic landscape of business, mastering budget allocation management is essential for financial stability and growth. Finance teams, through regular monitoring, comprehensive spending records, and collaborative efforts, can navigate the complexities of budget allocation successfully. By promoting accountability, gaining insights for future planning, and identifying saving opportunities, finance teams become key contributors to the overall financial health of the organization. Adopting these best practices ensures that budget allocation becomes a strategic tool for optimizing resources and achieving long-term financial objectives .

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Budgeting 101: How to Budget Money

Lauren Schwahn

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

If I have take-home pay of, say, $3,000 a month, how can I pay for housing, food, insurance, health care, debt repayment and fun without running out of money? That’s a lot to cover with a limited amount, and this is a zero-sum game.

The answer is to make a budget.

What is a budget? A budget is a plan for every dollar you have. It’s not magic, but it represents more financial freedom and a life with much less stress. Here’s how to set up and then manage your budget.

How to budget money

Calculate your monthly income, pick a budgeting method and monitor your progress.

Try the 50/30/20 rule as a simple budgeting framework.

Allow up to 50% of your income for needs, including debt minimums.

Leave 30% of your income for wants.

Commit 20% of your income to savings and debt repayment beyond minimums.

Track and manage your budget through regular check-ins.

Understand the budgeting process

Figure out your after-tax income : If you get a regular paycheck, the amount you receive is probably it, but if you have automatic deductions for a 401(k), savings, and health and life insurance, add those back in to give yourself a true picture of your savings and expenditures. If you have other types of income — perhaps you make money from side gigs — subtract anything that reduces it, such as taxes and business expenses.

Choose a budgeting plan: Any budget must cover all of your needs, some of your wants and — this is key — savings for emergencies and the future. Budgeting plan examples include the envelope system and the zero-based budget.

Track your progress: Record your spending or use online budgeting and savings tools .

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Automate your savings: Automate as much as possible so the money you’ve allocated for a specific purpose gets there with minimal effort on your part. An accountability partner or online support group can help, so that you're held accountable for choices that blow the budget.

Practice budget management: Your income, expenses and priorities will change over time, so actively manage your budget by revisiting it regularly, perhaps once a quarter. If you're struggling to stick with your plan, try these budgeting tips .

budget allocation works

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles : 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

The key to keeping a budget is to track your spending on a regular basis so you can get an accurate picture of where your money is going and where you’d like it to go instead. Here’s how to get started: 1. Check your account statements. 2. Categorize your expenses. 3. Keep your tracking consistent. 4. Explore other options. 5. Identify room for change. Free online spreadsheets and templates can make budgeting easier.

Start with a financial self-assessment. Once you know where you stand and what you hope to accomplish, pick a budgeting system that works for you. We recommend the 50/30/20 system, which splits your income across three major categories: 50% goes to necessities, 30% to wants and 20% to savings and debt repayment.

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20

budget principles

: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

The key to keeping a budget is to

track your spending

on a regular basis so you can get an accurate picture of where your money is going and where you’d like it to go instead. Here’s how to get started: 1. Check your account statements. 2. Categorize your expenses. 3. Keep your tracking consistent. 4. Explore other options. 5. Identify room for change. Free

online spreadsheets and templates

can make budgeting easier.

Start with a financial self-assessment. Once you know where you stand and what you hope to accomplish, pick a

budgeting system

that works for you. We recommend the 50/30/20 system, which splits your income across three major categories: 50% goes to necessities, 30% to wants and 20% to savings and debt repayment.

Try a simple budgeting plan

We recommend the popular 50/30/20 budget to maximize your money . In it, you spend roughly 50% of your after-tax dollars on necessities, including debt minimum payments. No more than 30% goes to wants, and at least 20% goes to savings and additional debt payments beyond minimums.

We like the simplicity of this plan. Over the long term, someone who follows these guidelines will have manageable debt, room to indulge occasionally, and savings to pay irregular or unexpected expenses and retire comfortably.

The 50/30/20 budget

Find out how this budgeting approach applies to your money.

Your 50/30/20 numbers:

Necessities

Savings and debt repayment

Do you know your “want” categories?

Become a NerdWallet member to track your monthly spending trends, including how much you're allocating to needs and wants.

Allow up to 50% of your income for needs

Your needs — about 50% of your after-tax income — should include:

Basic utilities.

Transportation.

Minimum loan and credit card payments. Anything beyond the minimum goes into the savings and debt repayment category.

Child care or other expenses you need so you can work.

If your absolute essentials overshoot the 50% mark, you may need to dip into the “wants” portion of your budget for a while. It’s not the end of the world, but you'll have to adjust your spending.

Even if your necessities fall under the 50% cap, revisiting these fixed expenses occasionally is smart. You may find a better cell phone plan , an opportunity to refinance your mortgage or an opportunity for less expensive car insurance . That leaves you more to work with elsewhere.

Leave 30% of your income for wants

Separating wants from needs can be difficult. In general, though, needs are essential for you to live and work. Typical wants include dinners out, gifts, travel and entertainment.

It’s not always easy to decide. Are restorative spa visits (including tips for a massage ) a want or a need? How about organic groceries? Decisions vary from person to person.

If you're eager to get out of debt as fast as you can, you may decide your wants can wait until you have some savings or your debts are under control. But your budget shouldn't be so austere that you can never buy anything just for fun.

Every budget needs wiggle room — maybe you forgot about an expense or one was bigger than you anticipated — and some money to spend as you wish. If there's no money for fun, you'll be less likely to stick with your budget.

Commit 20% of your income to savings and debt paydown

Use 20% of your after-tax income to put something away for the unexpected, save for the future and pay off debt balances (paying more than minimums). Make sure you think of the bigger financial picture; that may mean two-stepping between savings and debt repayment to accomplish your most pressing goals.

budget allocation works

Many experts recommend you try to build up several months of bare-bones living expenses. We suggest you start with an emergency fund of at least $500 — enough to cover small emergencies and repairs — and build from there.

You can’t get out of debt without a way to avoid more debt every time something unexpected happens. And you’ll sleep better knowing you have a financial cushion.

Get the easy money first. For most people, that means tax-advantaged accounts such as a 401(k). If your employer offers a match, contribute at least enough to grab the maximum. It's free money.

Why do we make capturing an employer match a higher priority than debts? Because you won’t get another chance this big at free money, tax breaks and compound interest. Ultimately, you have a better shot at building wealth by getting in the habit of regular long-term savings.

You don’t get a second chance at capturing the power of compound interest . Every $1,000 you don’t put away when you’re in your 20s could be $20,000 less you have at retirement .

Once you’ve snagged a match on a 401(k), if available, go after the toxic debt in your life: high-interest credit card debt, personal and payday loans, title loans and rent-to-own payments. All carry interest rates so high that you end up repaying two or three times what you borrowed.

If either of the following situations applies to you, investigate options for debt relief , which can include bankruptcy or debt management plans :

You can't repay your unsecured debt — credit cards, medical bills, personal loans — within five years, even with drastic spending cuts.

Your total unsecured debt equals half or more of your gross income.

Once you’ve knocked off any toxic debt, the next task is to get yourself on track for retirement. Aim to save 15% of your gross income; that includes your company match, if there is one.

If you’re young, consider funding a Roth individual retirement account after you capture the company match. Once you hit the contribution limit on the IRA, return to your 401(k) and maximize your contribution there.

Regular contributions can help you build up three to six months' worth of essential living expenses — not your full budget, just the must-pay basics. You shouldn’t expect steady progress because emergencies happen, and that's when you should pull money from this fund. Just focus on replacing what you use and building higher over time.

These are payments beyond the minimum required to pay off your remaining debt .

If you’ve already paid off your most toxic debt, what’s left is probably lower-rate, often tax-deductible debt (such as your mortgage). Tackle these when the more-basic goals listed above are covered.

Any wiggle room you have here comes from the money available for wants or from saving on your necessities, not your emergency fund and retirement savings.

Congratulations! You’re in a great position — a really great position — if you’ve built an emergency fund, paid off toxic debt and are socking away 15% toward a retirement nest egg. You’ve built a habit of saving that gives you immense financial flexibility. Don’t give up now.

Consider saving for irregular expenses that aren’t emergencies, such as a new roof or your next car. Those expenses will come no matter what, and it’s better to save for them than borrow.

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How to Make a Budget: Your Step-by-Step Guide

12 Min Read | Jan 4, 2024

Rachel Cruze

Making a budget might seem overwhelming at first, but hear this: You can do it. How? By breaking down the process a bit. Because no one eats an elephant by swallowing it whole. (You go one bite at a time.) And no one leaps into budgeting like a pro. (You take it one step at a time.)

So, here we go—bite by bite, step by step. Here’s how to make a budget in five steps.

  • List Your Income
  • List Your Expenses
  • Subtract Expenses From Income
  • Track Your Transactions
  • Make a New Budget Before the Month Begins

What Is a Budget?

Real quick though, let’s define the word  budget . A budget is just a plan. It’s not a restriction on spending—it’s a plan for what you’ll do with your money. It’s a plan   for what’s coming in and what’s going out.

When you learn how to make a budget—and do it every month—you’re giving your money purpose. You’re taking control. Goodbye, money anxiety. Hello, money goals.

Keep reading to see how to make it happen so you can make a budget that works for you.

How to Make a Budget in 5 Steps

No matter how you feel about budgeting right now, no matter what money goals you have, and no matter your income—you can make (and keep!) a budget in just five steps.

But first, decide if you’re making a budget on paper, with a spreadsheet, or in an app. (I know a  great app called EveryDollar . It’s what I use to budget—and it’s the best. Just saying.) Either way, it’s totally okay to start by writing out everything on a sheet of paper.

Pro tip:  Before you dive into the steps, open up your online bank account or grab your bank statements. That will give you the info you need as you start filling out numbers in your budget.

Step 1: List Your Income

Income  is any money you plan to get during that month—that means your normal paychecks and any  extra money coming your way  through a side hustle, garage sale, freelance work or anything like that.

You work weekends as a barista or babysitter? That’s income, and it goes in your budget. 

Create separate income budget lines for every paycheck you (and your spouse) get, plus anything extra coming in. (Note: You’re working with  net income  here, meaning what you bring in after taxes or anything else that’s taken out of your paycheck.) Here’s an example:

His Paycheck 1: $1,500 Her Paycheck 1: $1,500 His Paycheck 2: $1,500 Her Paycheck 2: $1,500 Side Hustle: $500

Total Income: $6,500

If you’ve got an  irregular income , take a look at what you’ve made the last few months and list the  lowest amount  as this month’s planned income budget line. You can adjust later in the month if you make more and add that extra money to your money goal or another budget line.

Step 2: List Your Expenses

Now that you’ve planned for the money coming in, you can plan for the money going out. It’s time to list your expenses! (Yep, this is when that bank account or statement gets super helpful.)

Pro tip:  When you’re making a budget, before you put in all the things you’ll pay for this month, set aside money for giving. I believe in putting 10% of your income here—it’s a great way to start your budget with a  spirit of generosity ! Next, budget for your savings goals, like  an emergency fund  (depending on your Baby Step, which I'll talk about more in a minute). You've got to pay yourself first before you pay everyone else!

What’s next?

Cover your Four Walls.  That’s food, utilities, shelter and transportation . Make a budget category for each of these and create budget lines underneath for your specific expenses.

Money

Start budgeting with EveryDollar today!

Think of a budget category as a folder and the lines as the files inside it. Or the category is like a playlist, and the lines are like the songs. Or . . . okay, you get it.

Here’s what it might look like for you (but with your numbers, of course!):

Budget Category: Food Groceries: $700

Budget Category: Utilities Electricity: $130 Water: $60 Natural Gas: $40

Budget Category: Shelter/Housing Mortgage: $1,450 HOA Fees: $50

Budget Category: Transportation Gasoline: $180

Some of these are called  fixed expenses —aka the expenses that stay the same every month, like your rent or mortgage.

Other expenses change up, like groceries or gasoline. By the way, that grocery budget line is super hard to guess at first, so just start with a really good estimate based on your past spending. You’ll learn better what you actually need here in the months ahead.

Next, list all other monthly expenses.  Start with the essentials: I’m talking about insurance,  debt , childcare, etc. Then work in a miscellaneous line and any nonessentials like personal spending, fun money and entertainment.

Then use your online bank account or those bank statements to estimate what you plan to spend for everything.

Here’s a quick callout. If you’re working to save money,  get out of debt , or hit some other money goal, you’ll get there way quicker if you cut back on the nonessential spending.

If you don’t know what goal to focus on right now, check out the  7 Baby Steps . This plan breaks the most important money goals into easy-to-understand, actionable steps!

Make new budget categories for your new budget lines.  Of course, if you spend money eating out, you can just add a line called Restaurants under your food category—as long as you remember groceries are a necessity , but drive-thrus or fancy three-course meals out  are not .  

Step 3: Subtract Expenses From Income

Math time! (It won’t be too bad. But it is totally necessary. Let’s do this.)

Subtract all your expenses from your income. This number should equal zero, meaning you just made a zero-based budget.

This is key: A  zero-based budget  doesn’t mean you let your bank account reach zero. (Leave a little buffer in there of about $100–300.) It also doesn’t mean you blow all your money.

Zero-based budgeting just means you  give every dollar a job to do : spending, giving,  saving or paying off debt . It’s all accounted for and given a purpose. It’s the reason I love this method.

You work hard for your money, right? Well, it should work hard for you! Every. Single. Dollar.

Okay, though, what do you do if you subtract your expenses from your income—and you’ve got money left over?  Don’t leave it there.  You’ll end up mindlessly spending it on  coffees , convenience store candy, and those one-click deals of the day. Get those dollars to work by putting any “extra” money toward your current  money goal .

What if you end up with a negative number? It’ll be okay. You just need to  cut expenses  until your income minus your expenses equals zero. (Hint: Start with those eating-out and entertainment budget lines. If restaurants are your love language, this will hit hard, but you can’t spend more than you make. You’ve got this!)

If you’re still struggling to make ends meet, don’t forget the power of the  side hustle  or overtime. Just remember not to increase your spending when you increase your income. Your extra cash needs to cover your budgeted expenses.

Is the math stressing you out a little? Listen, let  EveryDollar  do that for you. Our free budgeting app is made for this zero-based budgeting stuff, and you won’t have to keep running back to the calculator to get it right.

Okay, so that’s it for  making  a budget. The next two steps are all about  sticking with it .

Step 4: Track Your Transactions (All Month Long)

Ready for one of the biggest secrets for how to budget—and do it really, really well? Good, because I don’t want to keep it a secret. Here it is: Track. Your. Transactions.

Every single one.

Putting the plan on paper, in your spreadsheet, or in your app is just a bunch of good intentions without this step. It’s like writing down a goal to run a marathon, making a training plan, lacing up your shoes . . . and flopping on the couch with a bag of donuts.

What am I even talking about?  Tracking your transactions  means you account for  everything  that happens with your money  all month long .

When you fill up the  gas tank , subtract that expense from transportation. When you pay the rent, subtract that expense from housing. When you buy a coffee on the way to the office, subtract that expense from your personal spending (or whatever budget line you made for the perk that helps you work).

Track your transactions regularly. That might be once a week. Or at the end of each day. Or it might mean you log a purchase before you leave the grocery store parking lot. Whatever works for you and gets every expense tracked.

As you’re tracking, make adjustments as you need to. Yes, really! This is your budget. You make it work for you. If the  electricity bill  comes in higher than you thought, just tweak another budget line to make up for it. If the water bill comes in lower, then celebrate and move that money over to your current money goal—or add it to a budget line that went over.

I can’t say enough good things about tracking your transactions. But to sum up, I love this budgeting step because it’s how you:

  • Stay accountable  to your budget, yourself and your money goals. (Also your spouse, if you’re married! And remember EveryDollar? You two can share an account so you’re budgeting as a team!) No secrets. No pretending a purchase didn’t happen.
  • Keep from overspending,  because as you enter expenses, you see what you have left in every budget line! Instantly, you’ll know what’s left so you don’t overspend.
  • Stay on top of the budget.  Your budget is not a set-it-and-forget-it project. It’s not a slow cooker. When you track transactions, you get in your budget all the time, and you can make adjustments so you know where your money is going—all the time.
  • Learn and adjust your spending habits  so you can get back on track with your goals and finally make them happen. One monthly budget at a time.

Step 5: Make a New Budget Before the Month Begins

While your budget shouldn’t change too much from month to month, the fact is, no two months are exactly the same. That’s why you create a new  budget every single month —before the month begins. Then you can stare down certain expenses and say, “You will  not  be a surprise to my bank account, thank you very much.”

When you’re ready to start your next budget, just copy over this month’s budget to the next, and then make changes for anything new that’s coming.

Here are some examples of month-specific expenses to prep for:

  • Celebrations like birthdays and anniversaries:  Never forget those.
  • Holidays:  Do you need decor, gifts or a feast at the ready?
  • Seasonal purchases:  Don’t forget to budget for  back-to-school season , fall coffee-flavor releases, and your spring kickball league.
  • Semiannual expenses:  Do you pay your auto insurance twice a year? Do you need an oil change next month?
  • Annual expenses:  Is it time for your yearly eye exam? Do you need to  budget for your pet to get his shots at the vet?

Here’s one way to handle getting these changing expenses into your budget:

  • Create a budget category called something like Month-Specific Stuff or Alternating Expenses or Discretionary (if you like huge words).
  • Then add whatever lines you need for  that month  and delete the ones from  last month  you no longer need.

Where does the money come from? You can cut back spending somewhere else and move that money over to this category. Taking $5–20 from a couple budget lines really adds up. Literally. Or if you can, crank up your income for the month. (Time for an extra freelance gig!)

Hey, if this part sounds complicated or clunky, that’s because it can be at the beginning. It takes people about three months to really get the hang of budgeting, so give yourself some grace and keep working on it! The benefits of budgeting will far outweigh the effort.

Why Making a Budget Is So Important

What are the benefits? Why is it worth it? Because when you budget, you’re telling your money where to go—so you don’t have to wonder where it went. You’re showing your money who’s in charge. (You.)

Budgeting is how you make any money goals happen—it’s how you make progress with your finances! It puts you in control. It gives you permission to spend your money  your  way.

I could go on and on and on because I honestly believe making a budget—and living that budgeting life—is one of the most important decisions you’ll make with your finances.

How to Make a Budget With Confidence

That’s it! That’s how to make a budget—and why you should. So, now it’s time to do it! It’s time to get confident with your money.

But what about being confident with budgeting? Hey, let  EveryDollar  help! This free tool makes budgeting easier, which is always a win. Download EveryDollar. Budget every month. You got this!

Save more. Spend better. Budget confidently.

Get EveryDollar: the free app that makes creating—and keeping—a budget simple . (Yes, please.)

Did you find this article helpful? Share it!

Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simple and Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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Project Management

How to manage a project budget in 7 easy steps.

Senior Content Marketing Manager

June 22, 2023

Budget management has a bad rap: People associate it with boring spreadsheets and lengthy expense reports . But managing project budgets is actually an art form—and, for those who work at agencies, essential to your company’s business model.

A good project budget is more than just dollars and cents–it’s context. It’s a tool to help tell the story of what your team is doing and how well they’re doing it.

This approach to project budget management helps you see, in real-time, what’s working and what’s not. It also gives you the hard numbers to evaluate your process and level up your budgeting skills over time. Here are the steps you should take to set and track every project budget you’re in charge of.

What is a Project Budget?

1. make a step-by-step project outline, 2. list every required resource, 3. assign a cost to each resource, 4. add a contingency, 5. document your budget, 6. get your project budget approved, 7. monitor (and adjust) your budget, 5 templates for managing project budgets.

A project budget is a financial plan that outlines the estimated costs of all the activities required to complete a specific project. It includes all the resources required to complete a project, such as materials, equipment, labor, and other expenses.

A project budget isn’t “$20,000.” It’s a clear breakdown of how you’ll spend that $20,000 and why you’ll spend it that way.

Theoretically, a new hire should be able to walk into your agency and execute on the budget you’ve created without further guidance. Unfortunately, it’s not exactly easy without the right approach and tools.

ClickUp Milestones Dashboard View CTA

What should be included in a project budget?

ClickUp Dashboards for budget reports

As a starting point, your budget should include three things:

  • Total project costs : Labor, materials, and equipment
  • How resources will be allocated : Project budget allocations are typically split up by deliverables 
  • A project timeline : This breaks down when you expect to spend the money associated with each project deliverable

We’ll go into more detail on how to build each of these components into your budget shortly.

Why is managing a project budget important?

Because your budget includes context about your project, it can be used to guide and track your team. Good budget management can help you with: 

  • Project scope control: All agency project managers have dealt with that one client who keeps changing their expectations. Active budget management allows you to see whether these modifications fit within the original project scope or whether you need to have a discussion to reset expectations.
  • Project Cost control : Keeping track of your spending as you go will flag overages early before hitting a point where you don’t have enough money to finish the project. Cost changes are often out of your (or your team’s) control, but how you address them is in your control — if you catch them in time. 
  • Progress tracking: When project budget line items are tied to deliverables, it’s easy to see where you are on each task. If you haven’t spent the money for, say, the fonts you need for the webpage, you’ll know the design stage isn’t complete.
  • Planning future projects: Watching your project budget progress will help you make a stronger estimate for your next project. You can see where your projections don’t match reality and improve your forecasting skills.

How to Manage a Project Budget in 7 Steps

Now that you know how complex project budget management is, you might feel a little intimidated. Don’t worry! With a bit of planning, anyone can build and manage project budgets. Let’s go over how to build and manage a budget step by step.

You’ll want to start with a full project plan that’s made in collaboration with your project team and any stakeholders. You won’t even have numbers to work with at this point — and that’s okay! A good project budget requires you to know the entire project scope and every deliverable your team will be accountable for. 

Check out these expense report templates !

timeline view 3.0

Just because we’re calling this an “outline” doesn’t mean it’s skeletal. You’ll need to break every deliverable down into a step-by-step progression so you can see every resource that will be necessary. 

Say your project is a  social media advertising package. You’ll need team members to: 

  • Concept the campaign
  • Write and edit the copy
  • Curate and purchase stock images
  • Execute the campaign
  • Track and report performance

Bring in your team members to check over each deliverable’s subtasks.  They’re the ones who routinely create such deliverables, so they know everything that goes into making the final product. 

Bonus: Bookkeeping templates !

Time is money, and so are resources like freelancers, training, and research. Every step your team takes will require at least one of these things. 

Under each subtask, make a list of every resource required. Here are some common project resources:

  • Team members: How many internal employees will be working on the project and for how much time? Will you need to hire freelancers as well?
  • Equipment and licenses: Will you need access to any physical equipment or online tools? Will you be purchasing them outright, or paying a licensing fee — and if it’s the latter, for how long?
  • Training: What skills will your employees need to learn that they don’t already have? What resources will they use to learn those skills, and how much time will it take?
  • Research: Will you need to purchase industry research or pilot studies to learn what your target audience will respond to?
  • Travel and hospitality: Is anyone planning to fly out to a client’s location, host business lunches, or hail a rideshare to handle project-related duties?
  • Professional services: Will you bring in consultants or other experts to guide your project?

Risk Log in ClickUp

You may have other expenses, like procurement and IT, tied to your project budget, but the list above covers the most common resources required for teams like yours.

Related: Price list templates !

Once you’ve broken down your project into every resource you’ll need, it’s time to figure out what all these resources will cost. 

There are four ways to make an estimate for a project budget. Read the method descriptions below, and choose one based on your agency structure and the available tools. 

Process 1: The top-down approach

If you already have the dollar amount that’s allocated for the project, your job is to determine what you can achieve with the money you have. Assign a certain amount to each deliverable based on how resource-heavy each step is. Then, project managers should allocate all subtasks.

Budgeting with a top-down approach may require you to pare down the project’s scope and think of more cost-effective ways to meet your objectives.

Process 2: The bottom-up approach

Assign a dollar amount to each resource you listed in the last step, then sum everything up to get the final project budget. You’ll need to estimate work hours, freelancer rates, and tool costs to get an accurate number. Ask your team (or project managers) for help if you’re not sure what’s reasonable for any given item.

Process 3: Analogous

Find a previous project that’s similar to the one you’re budgeting for now, and use the actual costs from that project as estimates of what you’ll need for this project. This method only works if 1) your past project costs included comparisons between estimated and actual costs and notes of any unexpected expenses and 2) the two projects are virtually identical in scope.

Process 4: The three-point approach

This method asks you to make three different budgets, then average them. You’ll need to calculate:

  • A best-case scenario budget: Every step is completed in the shortest amount of time possible, and all necessary resources can be found at the lowest fair rate. 
  • A worst-case scenario budget: You fall behind and have to pay overtime or rush fees, you have to buy more expensive equipment, and so on. 
  • A most-likely scenario budget: People stay mainly on schedule, though a few steps take a bit longer than planned, and you don’t get the lowest prices, but you’re not paying excessive fees either. 

Take these three numbers and average them to calculate your total budget. Consider weighting one higher than the others, depending on which scenario you think is most likely.

If you’re torn between project budget estimate methods, don’t sweat it! You can always combine them. For example, you may use bottom-up estimates to build your project budget for the three-point method. 

Bonus: Budget proposal templates !

Contingencies are the “oh no” fund in case you really do hit that worst-case scenario budget. It’s an essential part of your cost risk management plan .

Typically, your contingency fund will be 5-10% of your total project budget. You may not need to dip into your contingency funds often, which is great!

But every project budget should have them, just in case.

Bonus: Business model canvas template

Once you have all your deliverables and the numbers attached to them, it’s time to make an official budget document. We love using ClickUp for project budgeting (and we’ve shared some useful templates below!). 

If you’re not using ClickUp (yet), we recommend you use a free project management software rather than a spreadsheet. A good app makes it easier to organize and update all the information you need to include.

And speaking of, your project budget document should include: 

  • Each deliverable (and all subtasks for each), along with final due dates plus internal deadlines. 
  • Line items below each subtask with every resource required and its expected cost. 
  • When you expect to spend the money for each resource based on your project schedule.
  • A space to list actual costs and expenditure dates, so you can update your budget as the project unfolds. 
  • Whoever is responsible for each line item: Who will be gathering travel receipts? Who will be overseeing freelancer invoices?

After you have all that information, add up the total costs for each deliverable or milestone to calculate your projected project budget. 

And as one last step, ask your team members working on the project to review the budget (again) to make sure you didn’t miss anything. It’s much better to catch a mistake at this stage than mid-way through the project budgeting process.

You may pitch your budget to a client or simply submit it to your boss or other stakeholders. Tailor your ask to the audience.

But make sure you include details that show how your budget will lead to the desired project results — and how any decrease in the funding will necessitate scope changes. The work you’ve done in the previous steps will make it easy for you to justify your project budget request. 

Your budget can only help you track your progress and control costs and scope if you keep it current. You don’t need to update your budget right after every purchase, but you should set aside time to add expenses and gauge whether you’re straying too much from the estimated costs.

The optimal update frequency will vary based on the length of each stage and/or time between each deliverable. A budget that includes a lot of social media ad spend may need to be updated every few days; a project budget for a 200-page website may be fine with a weekly or biweekly check-in.

If you do catch serious mismatches between your budgeted and actual spend, move into mitigation mode. First, figure out what went wrong. Did you miss a subtask that took your freelancer an entire day to complete? Did the client rip up their project plan midway through the deliverable, so you had to backtrack? 

Whenever you identify an error, look to see if it’s been replicated in other stages and deliverables. Finally, check whether your contingency will cover the unexpected overage. If not, can you reallocate resources or find a way to use fewer resources for any other subtasks your team hasn’t started on yet? 

Or do you need to discuss other options? 

These discussions may involve your bosses or the client, and they’re not fun to have. But the sooner you have them, the more likely you are to find a solution that will at least work for everyone, even if it’s not ideal.

Make sure any changes are recorded in your project budget along with notes so you can remember what went wrong and plan to spend accurately in the future. 

Check out these general ledger templates !

By this point, you know budgets are complex — so why not make your life easier with a template? You’ll save time with all your setup and have access to ClickUp’s excellent Dashboards to help visualize your project budgeting and progress. 

Here are five of our favorite free ClickUp templates that will make you a budget management pro in no time:

1. ClickUp Project Outline Template

ClickUp Project Outline Template

Since the budget process starts with a full project outline, why not start your process with ClickUp’s Project Outline Template ? It has space for you to add everything you need for pre-budget planning:

  • Project Background
  • Project Introduction
  • Constraints and Assumptions
  • Key Deliverables
  • Budget and Investments

This won’t be the only template you need to rock for a project budget, but it will be the first template you should use during your budgeting process.

2. ClickUp Project Resource Matrix Template

ClickUp Project Resource Matrix Template

Cost estimates require math…a lot of math. ClickUp’s Project Resource Matrix Template guides you through those calculations by telling you where to put numbers and calculating the final amounts with formula fields . 

Use it to estimate costs for all types of resources (labor, equipment, overhead, SaaS tools, and raw materials), so don’t be afraid to use it for even the most unlikely projects. The views on this template include:

  • Getting Started Guide
  • Kanban Board
  • Resource Input Form
  • Resource List
  • Costs Table

These features make it easy to input cost estimates, project plan your resource management , and see where you should be budget-wise at any point in the budget timeline.

3. ClickUp Project Deliverables Template

ClickUp Project Deliverables Template

By this point, you know how important it is to break down your project budget by deliverable (and then by subtask). ClickUp’s Project Deliverables Template includes custom fields for budget, remaining budget, and expenditures so far.

It offers six views—including a Gantt view and a project budgeting List— and an automation that will post a comment when any custom field changes from a team lead or project manager.

In other words, this template is an agency-ready live budget tracker. Managing budgets will be a breeze with this template on your side.

4. ClickUp Project Request and Approval Template

ClickUp Project Request and Approval Template

If you want a more advanced and in-depth tracker than the Project Deliverables template, turn to ClickUp’s Project Request and Approval Template . 

  • It comes with pre-built List, Kanban, and Gantt views so you can organize your to-do list and see your timeline at a glance.
  • The pre-saved List only requires you to add details, so you’re not building your project from scratch.
  • There are six Custom Fields in ClickUp , including budget, spent, and budget remaining.

You can set due dates and priorities — which can help guide budget adjustments if they become necessary. 

5. ClickUp Project Cost Management Template

ClickUp Project Cost Management Template

If you have a lot of project budgets to manage, use ClickUp’s Project Cost Management Template for a high-level view of everything. This template comes with six statuses (to cover everything from new projects to evolving budgets to completed projects) and six views:

  • Projects List
  • Project Costs Table
  • Approval Process Board
  • Project Cost Request Form

It’s the one project budget management template to rule them all—and it will keep you ridiculously organized.

Managing Project Budgets: Best Practices for Success

Once everything is delivered and all your bills have been paid, it’s time for you to revisit the budget and make notes on any changes you made during the project. You can expect the lessons you learn to apply to similar projects in the future. 

We talked about how each budget tells the story of your team’s work. A clear and detailed helps you remember the details of a project even if you don’t get around to the review right away.

See line items you added after the fact, project tasks that took more resources than expected, and adjustments you made mid-stream to keep everyone on budget. Create a document (or use ClickUp’s Project Post Mortem template ) to keep track of your insights.

Review this information before you start each budget so you don’t make the same mistake twice. Budget management success means project success…so take the time to build a project budgeting process that’s thorough and thoughtful. 

Combine your knowledge with our great tools to build budgets that will lead to successful projects. Get started with ClickUp today!

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20%: Savings

Importance of savings.

  • Benefits of the Rule
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The Bottom Line

  • Budgeting & Savings

The 50/30/20 Budget Rule Explained With Examples

budget allocation works

U.S. Sen. Elizabeth Warren popularized the 50/20/30 budget rule in her book, All Your Worth: The Ultimate Lifetime Money Plan. The rule is to split your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings.

This intuitive and straightforward rule can help you draw up a reasonable budget that you can stick to over time in order to meet your financial goals.

Key Takeaways

  • The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do.
  • The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
  • The rule is a template that is intended to help individuals manage their money, to balance paying for necessities with saving for emergencies and retirement.
  • People who follow the 50/30/20 rule can simplify it by setting up automatic deposits, using automatic payments, and tracking changes in income.

Needs are the bills that you absolutely must pay and the things necessary for survival. Half of your after-tax income should be all that you need to cover those needs and obligations. If you are spending more than that on your needs, you will have to either cut down on wants or try to downsize your lifestyle, perhaps to a smaller home or more modest car. Maybe carpooling or taking public transportation to work is a solution, or cooking at home more often. Examples of "needs" include but aren't limited to:

  • Rent or mortgage payments
  • Car payments
  • Insurance and health care
  • Minimum debt payments

Wants are all the things you spend money on that are not absolutely essential. Anything in the "wants" bucket is optional if you boil it down. For example, you can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game.

This category also includes those upgrade decisions you make, such as choosing a costlier steak instead of a less expensive hamburger, buying a Mercedes instead of a more economical Honda, or choosing between watching television using an antenna for free or spending money to watch cable TV. Basically, wants are all those little extras you spend money on that make life more enjoyable and entertaining. In general, examples of "wants" include but aren't limited to:

  • New unnecessary clothes or accessories like handbags or jewelry
  • Tickets to sporting events
  • Vacations or other non-essential travel
  • The latest electronic gadget (especially an upgrade over a fully functioning prior model)
  • Ultra-high-speed Internet beyond your streaming needs

Finally, try to allocate 20% of your net income to savings and investments. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting more distant financial goals. Examples of savings could include:

  • Creating an emergency fund
  • Making IRA contributions to a mutual fund account
  • Investing in the stock market
  • Setting aside funds to buy physical property for long-term holding
  • Making debt repayments beyond minimum payments

If emergency funds are ever used, the first allocation of additional income should be to replenish the emergency fund account.

Americans are notoriously bad at saving, and the nation has extremely high levels of debt. As of December 2023, the average personal savings rate for individuals in the United States was just 3.7%.

The 50-30-20 rule is intended to help individuals manage their after-tax income, primarily to have funds on hand for emergencies and savings for retirement . Every household should prioritize creating an emergency fund in case of job losses, unexpected medical expenses, or any other unforeseen monetary cost. If an emergency fund is used, a household should focus first on replenishing it.

Saving for retirement is also a critical step as individuals are living longer. Calculating how much you will need for retirement, beginning at a young age, and working towards that goal will ensure a comfortable retirement.

Benefits of the 50/30/20 Budget Rule

The 50/30/20 rule can guide individuals to financial prosperity in a number of different ways. Potential benefits of these guidelines include:

  • Ease of use: The 50/30/20 rule offers a straightforward framework for budgeting, making it simple to comprehend and apply. You may distribute your income immediately without the need for intricate calculations. Even the least financially-savvy person can adhere to these rules.
  • Better money management: By using a budget, you may manage your money in a balanced way. You can ensure that your necessary costs are covered, that you have money for discretionary spending , and that you're actively saving for the future. In this way, you can save for current as well as future needs, and still have a little fun with your finances.
  • Prioritization of vital expenses: You can make sure that you cover your fundamental needs without going over budget or taking on too much debt by giving these basics top priority. As these rules stipulate that half of your budget goes towards needs, this plan helps make sure your essentials are more likely to be met.
  • Emphasis on savings goals: By allocating 20% of your income to savings, you can set up an emergency fund, prepare for retirement, pay off debt, invest, or pursue other financial goals. By consistently saving this amount, you establish sound financial practices and build a safety net for unforeseen costs or future goals.
  • Long-term financial security: Using these rules, you prioritize your financial future by continuously setting aside 20% of your salary. This expenditure on savings can help you accumulate money, meet long-term financial objectives, and give yourself and your family a sense of security as you approach retirement in either the short-term or long-term timeframe.

The idea behind the 50/30/20 rule is that anyone can use these proportions, regardless of their income. However, if your income is low or you live in an area with a higher cost of living, you may need to adjust the percentages.

How to Adopt the 50/30/20 Budget Rule

No single way of tracking to a budget will work for everyone. However, here are some high-level tips on adopting a 50/30/20 budget that are relevant to all individuals.

Track Your Expenses

To better understand your spending habits, keep track of your expenses for a month or two. Analyze your spending to determine how well it adheres to the 50/30/20 breakdown by classifying it into needs, wants, and savings. This will set the groundwork for better understanding how far off from budget you will be at the outset. Also, the only way you'll know you're being successful at adhering to this budget is by tracking your actual spending. Most often, this can be done fairly easily using spreadsheet solutions such as Microsoft Excel .

Understand Your Income

The basis of the 50/30/20 budget is rooted in understanding what your income is. Take caution that your gross income may be vastly different from your net income as Federal income taxes reduce what you'll take home. By understanding what you earn and what actually hits your bank account each pay period, you'll be better positioned to establish the correct budget amounts for the three categories.

Identify Your Critical Costs

This includes expenses such as rent or mortgage payments, utilities, groceries, transportation expenses, insurance premiums, and debt repayments. These costs are non-negotiable, as they are the expenses necessary for your daily living. Because these expenses may take up the largest portion of your budget, it's important to be most mindful with this group. In addition, these expenses must be incurred, so you likely have the least amount of flexibility once you have committed to them.

Locking in a rental agreement may require a six-month or 12-month commitment.

Automate Your Savings

By automating the process, saving will be simpler. Set up monthly automated payments from your checking account to your investment or savings accounts. This guarantees that your funds increase steadily without requiring manual labor. With a lighter burden of administratively managing your savings, you may find it easier to regularly review your budget to make sure it is in line with your lifestyle and financial objectives.

Maintain Consistency

Adopting the 50/30/20 budget guidelines successfully requires maintaining consistency. Over time, stick to your spending strategy and resist the desire to go over budget or depart from your percentage allocations. Like any other form of budget, this plan is often most successful when there are clear guidelines that can be leveraged every month. Be mindful to reset your spending limits each month, and strive to maintain consistency from one period to the next.

Example of the 50/30/20 Budget Rule

Imagine Elaine, a woman who recently graduated from college and started her first full-time job. She wants to develop good financial habits from the beginning and has heard about the 50/30/20 budget rule. Eager to take control of her finances, she decides to set up a 50/30/20 budget.

To understand her spending patterns, Elaine starts tracking her expenses for a month. She uses a budgeting app that categorizes her expenses automatically into needs, wants, and savings. She also calculates her monthly after-tax income , which amounts to $3,500. This will be her basis for allocating her budget according to the 50/30/20 rule.

After analyzing her tracked expenses, Elaine realizes that her essential expenses like rent, utilities, groceries, transportation, and student loan payments add up to approximately $1,750 per month. She allocates exactly 50% of her income, which is $1,750, to cover these needs. She then allocates $1,050 to discretionary items and $700 each month to retirement and savings. And she sets up an automatic transfer from her checking account to her savings account on her payday.

Six months later, Elaine is promoted. Because her income has changed, she reevaluates each budget amount, reviews her overall budget, and adjusts as needed. She also realizes that her transportation expenses are higher than expected, so she decides to start carpooling with a colleague to reduce costs.

Elaine remains disciplined and consistent with her budgeting practice. She prioritizes financial well-being and regularly evaluates her progress toward her goals. As she progresses in her career, she continues to adjust her budget to reflect changes in her income and priorities. She has taken steps to not only have her current needs met but to also have sufficient funds available for her future.

Can I Modify the Percentages in the 50/30/20 Rule to Fit My Circumstances?

Yes, you can modify the percentages in the 50/30/20 rule based on your circumstances and priorities. Adjusting the percentages can help you tailor the rule to better suit your financial goals and needs. This is especially relevant for people living in places with a higher cost of living or for people who have higher long-term retirement saving goals.

Should I Include Taxes in the Calculation of the 50/30/20 Rule?

Taxes are typically excluded from the calculation of the 50%, 30%, 20% rule since it focuses on allocating income after taxes. You should consider your after-tax income when applying the rule. If you do decide to factor in taxes, be mindful to use gross income and appropriately forecast what your taxes will be.

How Can I Budget Effectively Using the 50/30/20 Rule?

To budget effectively using the 50%, 30%, 20% rule, track your expenses, prioritize essential needs, be mindful of wants, and consistently allocate savings or debt repayment within the designated percentage.

Can I Use the 50/30/20 Rule to Save for Long-Term Goals?

Yes, the 50/30/20 rule can be used to save for long-term goals. Allocate a portion of the 20% to savings specifically for your long-term goals, such as a down payment on a house, education funds, or investments. The rule is intentionally meant to bring focus to savings.

Saving is difficult, and life often throws unexpected expenses at us. The 50-30-20 rule provides individuals with a plan for how to manage their after-tax income. If they find that their expenditures on wants are more than 30%, for example, they can find ways to reduce those expenses and direct funds to more important areas, such as emergency money and retirement.

Life should be enjoyed, and living like a Spartan isn't recommended, but having a plan and sticking to it will allow you to cover your expenses and save for retirement, all while doing the activities that make you happy.

FiftyThirtyTwenty.com. " Financial Stability in America ."

Federal Reserve Bank of St. Louis, FRED. " Personal Saving Rate ."

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Creating a Budgeting Process: Step-by-Step

The budgeting process is an essential business function that’s bound to make even the most organized managers stress. What could be more important to the daily operations of the company than its cash flow? Messing up in this field could result in disrupted projects or, at worst, insolvency. 

And yet, studies have shown that  about half of organizations  don’t even have a formally documented budgeting process.

If your organization is taking on some new projects and you need to make sure that the funding stays sufficient, then studying up on the budgeting process is the best next step to take. Find out how to not only keep track of expenses and revenue but also gain more value out of your purchases and procurement process.

What Is a Budgeting Process?

The process of reviewing past budgets and planning budgets to forecast revenue is known as the budgeting process. It includes aligning with upper management in order to analyze budget data and establish goals for the future to better  control spending .

When deciding on a budget, a business allocates resources to certain company projects and objectives. Controls are put in place to enforce budgeting policies and prevent overspending. We can generally look at three different types of budgets:

  • Operating  budgets involve both the revenue generated and the expenditures made during daily operations. Employee salaries and benefits are included in this category.
  • Capital  expenditure involves major purchases like physical properties and equipment. Budget managers consider this category by setting priorities and making decisions to control risks.
  • Cash flow  is another form of budgeting that looks at the relationship between income and expenses. Specifically, it makes sure that you have enough cash on hand at any time to cover immediate expenditures.

The budgeting process covers all the steps involved in determining and setting a budget, which can include:

  • Reviewing past financial quarters and using the data to forecast future expenses and revenues.
  • Developing a plan to manage the budget and implementing it. Allocate resources to cover the company’s projects and departments.
  • Regularly checking up on progress by monitoring budget levels throughout the quarter.
  • Evaluating the performance of the budgeting process in the end and seeing what can be learned.

But we need to go beyond just definitions and look at the role of budgeting in corporate and project management.

The Primary Goals of Budgeting

In addition to the obvious benefit of controlling spending and keeping tabs on financial activities, budgeting is taken seriously because it also:

  • Helps with project planning:  What happens if market conditions change and the business needs to address problems later down the line? Budgeting is the perfect way to prepare financially.
  • Coordinates collaboration:  Since the budget impacts everyone, the budgeting process must involve all departments and teams working together for the wellbeing of the overall company as a whole.
  • Motivates management:  Upper management teams who are aware of budgeting efforts are more likely to understand the goals and initiatives of the business. They are motivated to hold everybody accountable for a stable budget.
  • Measures performance:  Budgeting forces you to look at the financial figures and determine whether or not you’re meeting your targets. If any cash flow issues arise, you will be able to know early on.

A detailed budget sets realistic goals for your projects and ensures proper resource allocation to prevent costly spending overflows.

Why the Budgeting Process Is Vital

Companies balance their budgets for the same reason individuals do. By keeping track of the timing and amounts of income and expenditures, it’s possible to set realistic goals, track deviations in planning, and enforce corrective action.

Without enough cash, a business cannot sustain itself, but the advantages of the budgeting process are a little more complex than that.

  • Setting expectations:  Once a budget sets a spending target for a particular project, then the teams can work with those expectations in mind. They can set their own deadlines and allocate resources according to the company’s master budget.
  • Aligning resource allocation to the goals of the business:  Think about what part of the company deserves more money this quarter. For instance, if product sales are down this month, it may be wise to allocate more of the budget to sales and marketing.
  • Facilitating collaboration:  Departments should not be siloed. Budgeting is the perfect opportunity to connect the finance teams with the rest of the business. Everyone gets a chance to talk about priorities, expectations, funding, and goals, and the finance department gets to share guidance.

A company with a strong budgeting process in place is also seen as more trustworthy when it comes to third-party partnerships. For instance, if you ever need to borrow a business loan, your lender will likely want to know how well you’ve followed budgets in the past.

How Does One Approach Budget Management?

Budget management cannot be perfected overnight, and neither is it possible to achieve for one person. It requires collaboration among upper management, the finance department, and the various budget and project managers across the company.

A budget can be developed in a  top-down  approach, where upper management begins the process by looking at business objectives and current resources to prepare a budget plan. It then passes down the responsibility of enforcing this plan to the department managers, who themselves can set their own guidelines based on the overall budget allocation.

Top-down works out in most cases because lower management can save time and effectively hit the ground running since most of the work has been done externally.

Alternatively, budgeting can occur from the  bottom-up , essentially an inverse of top-down. Planning begins at the departmental level and goes up; that is, each department prepares its own budget plans and cost estimations, and upper management combines them all into one big, inclusive budget process.

Bottom-up is more time-consuming, but it also results in a more suitable budget since the people who will conduct daily operations and actually spend the money have a larger voice in how resources will be allocated. Each department is also likely to be more motivated to achieve financial goals this way since it was the one who made the budget to begin with.

In a non-business example, New York City famously implemented its own bottom-up strategy known as  Participatory Budgeting  in the early 2010s. The plan gave control of the public budgeting process to community members.

What Steps Does the Budgeting Process Involve?

Regardless of the approach you take, the next step is to convert the budgeting process into tangible business strategy. Start by determining your budgetary goals (i.e. what you’re trying to achieve with limited resources). Then determine how you will achieve those objectives and track your progress along the way.

  • Identify goals:  Depending on factors like market dynamics,sales trends, and current resources, a company has different needs regarding its budget and must plan accordingly.
  • Look at past data:  Take advantage of the existing information you have from last quarter. What did you learn about your last budget that can be used this time around? Were there unanticipated shortfalls in funding? Were the assumptions you made back then still accurate? And how has the market or industry changed since then? Encourage your individual departments to ask themselves these questions.
  • Get some tangible numbers out:  Getting into the actual figures, identify your income streams, investments, and expenditures. Whether we’re talking about exact numbers or estimates, look for fixed costs (overhead, static costs like rent, mortgage, utilities, salaries, and insurance), variable costs (discretionary fees like software subscriptions, travel costs, and advertising services), and irregular costs (surprise expenses that are difficult to forecast, such as special events and mergers/acquisitions).
  • Always have cash flow in mind:  Don’t just look at the amounts; look at the timing as well. Is your consistent revenue enough to take care of seasonal, momentary expenditures? Look at cash flow in terms of the money going in at a certain point compared to the money going out.

And don’t forget to revisit your budgeting process regularly. It’s not a one-time consideration, as you will need to check back and update your efforts. Schedule budgetary reviews every quarter so that potential issues are caught in time.

Budgeting Process Techniques and Best Practices

Corporate budgeting is a high-risk activity that even experienced management teams need time to get right. Thankfully, it isn’t too difficult with a bit of practice and an understanding of how the process generally works.

In addition to the above steps, know that budgets will often change with time. Many businesses operate in fluctuating markets where demand goes up and down depending on the month, which are conditions that call for seasonal budgeting. Also, be honest in your estimations. Don’t over-exaggerate sales or expenditures, and be sure to include even small charges like federal and state taxes.

Know the “Why” Behind the Numbers

A budget manager clearly works with a lot of numbers, but have you ever stopped to think about the “why” beyond those numbers? What assumptions is your budget based on, and how would you interpret those numbers?

To illustrate, try to think about the key causes for high expenses the next time you calculate them out. Are you in need of additional staff, hence the increased investment into salaries? Or are your sales teams short on tools, and you need to spend more on marketing initiatives?

On the revenue side of things, remember what products and services you sold to customers that quarter. Did the sales reach your intended goals, or did they fall short and cause cash flow problems early on? Are you able to adjust product pricing accordingly to address the problem, or is there an underlying need for more robust marketing strategies?

A budget is more than just a spreadsheet. It’s a guide to how your operations should be laid out.

Grasp at Key Performance Indicators

The budgeting process is also heavily KPI-based. Think about how resource allocation should reflect the overall goals of your organization. Key performance indicators tie your efforts to those business objectives and keep you going in the right direction as the budgeting process continues.

Some examples of KPIs often used by budgeting teams are:

  • Cash flow and expenses
  • Employee payroll
  • Accounts payable and receivable fees
  • Turnover rates

Regardless of which ones you end up using, make them clear and easily measurable to get the most out of them.

Get It Written Down

Planning out the budget needs to be a formal business process, so don’t just leave it a mental roadmap. Have a budget plan written down somewhere so that you may be thorough in your enforcement controls. In fact, successful companies always publish their annual budget documents to be shared throughout the organization for this reason.

While paper or even spreadsheet programs are an option, the most efficient and organized way to go about a budget report is through accounting and  procurement software  platforms. As requirements change and budgets shift in focus, a flexible and versatile way to manage your funds is essential to staying competitive in today’s market.

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budget allocation works

We are all familiar with guardrails on highways. They are put there to keep a simple mishap from turning into a full-blown catastrophe. If you go a little off course, the rails help you regain the path towards your destination. —Anonymous

Lean Budget Guardrails

Lean Budget Guardrails describe the policies and practices for budgeting, spending, and governance for a specific portfolio.

SAFe provides Lean budgeting strategies that eliminate traditional project-based funding and cost accounting overhead. In this model, LPM maintains appropriate levels of oversight through allocating value stream budgets and applying Lean budget guardrails. This way, enterprises can have the best of both worlds: a development process far more responsive to market needs and professional and accountable spending management.

Every SAFe portfolio operates within an approved budget for developing and deploying systems and Solutions that the Enterprise needs to meet its strategic objectives. As described in the Lean Budgets  article, the portfolio’s total budget is allocated to individual value streams by  Lean Portfolio Management (LPM) and portfolio stakeholders. The value stream’s budget funds the people and resources to help achieve the current Portfolio Vision and  Roadmap .

Establishing guardrails helps ensure that the mix of investments addresses both near-term opportunities and long-term strategy, that investments in technology, infrastructure, and maintenance aren’t routinely ignored, and that significant investments are approved appropriately. Figure 1 illustrates four Lean budget guardrails:

  • Guiding investments by horizon
  • Applying capacity allocation to optimize value and solution integrity
  • Approving significant initiatives
  • Continuous Business Owner engagement

The first two guardrails are quantitative, guiding the allocation of investments within the approved budgets. The last two are process-related and are mainly qualitative, establishing how the budgets are governed. These guardrails are described in the sections that follow.

Guardrail 1: Guiding Investments by Horizon

As described in Lean Budgets, portfolio investments are organized by investment horizons that reflect four-time horizons. The amount of budget a given value stream allocates to solutions in these horizons determines the near- and long-term health of both the value streams and portfolio.

For example, a value stream solely focused on a Horizon 1 solution may be under-investing in future solution innovations, creating long-term risk. This may be balanced by the portfolio’s intention to move the solution into Horizon 0 for subsequent decommissioning to enable the value stream to focus on other, more promising solutions. Accordingly, LPM establishes portfolio-level guidance for investments to optimize the whole while promoting decentralization so that individual value streams can optimize their solutions, as Figure 2 illustrates.

Figure 2 shows that LPM has established different allocations for investments in solutions for each investment horizon. While this may be a healthy mix for a technology business, every portfolio and value stream has to consider its current context in determining its investment allocations for each horizon. A newly created value stream might allocate significantly more of its budget to Horizon 2 because it simply doesn’t have any solutions in Horizon 1. For example, an established value stream retiring legacy solutions with substantial technical obsolescence might allocate more budget to Horizon 0. For more guidance on allocations for various industries, see [1].

Guardrail 2: Apply Capacity Allocation

Lean Budgeting enables decentralized decision-making and more efficient execution. However,  every train is challenged with balancing the backlog of new business Features with investment in the Architectural Runway continuously—for example, maintaining current systems, avoiding velocity reduction, and the need for wholesale replacement of components or solutions due to obsolete technology.

Balancing business features and enablers complicates prioritizing work since different forces can pull the teams in different directions, as Figure 3 shows.

One solution to this challenge is that value streams (and ARTs) apply  capacity allocation  as a  quantitative  guardrail to determine how much of the total effort can be allocated for each type of activity for an upcoming PI , as shown in Figure 4. Each value stream should adapt the capacity allocation categories or add new ones as needed.

Capacity Allocation Example Policies

Each value stream should develop explicit policies for managing capacity allocation. Following are example policy statements that many ARTs and Solution Trains have found helpful:

  • At each PI boundary, we agree on the percentage of capacity devoted to new features (or capabilities) versus enablers and tech debt and maintenance. Other capacity types may also apply, such as the percentage of capacity allocated to a specific epic.
  • We agree that Product and Solution Management have the authority to prioritize ART and Solution Train backlog items.
  • We agree to prioritize the business and enabler features and capabilities based on economics and in collaboration with architects.
  • We agree to collaborate on sequencing work in a way that maximizes customer value and minimizes technical debt.

While the agreed-to policies can persist for some time, the amount of capacity allocated will change periodically based on the context. In an ART context, the capacity allocation decision can be revisited as part of backlog refinement in preparation for PI planning. At the same time, Solution Management and Solution Architects make similar choices ahead of pre-PI planning.

Guardrail 3: Approving Significant Initiatives

While each value stream is funded to promote empowerment and local decision-making authority, it is reasonable to ensure that significant investments are governed responsibly.

Figure 5. shows that a significant initiative has been identified. It then goes through a decision filter to determine whether or not it exceeds the portfolio epic threshold, which LPM establishes.

  • Below threshold:  If the epic estimate is below the portfolio epic threshold, approval is managed through the ART or Solution Train Kanban systems.
  • Above threshold : If the epic estimate exceeds the portfolio epic threshold, it requires review and approval through the Portfolio Kanban system, regardless of which level the initiative originates. LPM defines the Portfolio Epic threshold to determine which Epics are a portfolio concern. Example thresholds include forecasted epic cost, forecasted number of PIs to implement epic, the strategic importance of the epic, or a combination of these factors.

Guardrail 4: Continuous Business Owner Engagement

Business Owners are uniquely qualified to ensure that the funding allocated to value streams is going toward the right things. Therefore, they serve as a critical guardrail that ensures that the priorities of the ARTs and Solution Trains are in alignment with LPM, customers, and Product and Solution Management, as illustrated in Figure 6.

Figure 6 shows the minimum activities Business Owners should actively participate in before, during, and after PI execution. They are briefly described next and covered in more detail in the Business Owners article.

  • Preparing for the upcoming PI – Business Owners ensure that ARTs and Solution Trains are allocating sufficient capacity for features, enablers, and technical debt and maintenance, as well as providing input on prioritization of Features and Capabilities using Weighted Shortest Job First (WSJF) . Business Owners also collaborate with Product and Solution Management to ensure that the work planned for the PI contains the right mix of investments that address near-term opportunities (horizon 1) and long-term strategy (horizons 2 and 3) and that sufficient capacity is allocated for decommissioning solutions (horizon 0).
  • PI Planning  – During PI planning Business Owners actively participate in key activities, including the presentation of the vision, draft plan review, assigning business value to team PI objectives, and approving final plans.
  • Inspect & Adapt (I&A) Workshop – During the I&A workshop , Business Owners provide feedback on the solution’s fitness for purpose during the System Demo  (or  Solution Demo ). The Business Owner’s feedback is critical, as only they can give the guidance the train needs to stay on course or take corrective action. Additionally, they help assess actual value achieved versus plan and participate in the upcoming problem-solving workshop.

Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Business, 2017.

Last update: 13 October 2023

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How to Make a Project Budget: Project Budgeting Basics (Templates Included)

ProjectManager

Make a project budget and stick to it with ProjectManager. Plan projects, manage resources and track costs with powerful features the whole team can use.

If you don’t have the funds, you’re not going to complete the project successfully. That’s why a project budget is so important: it’s the lifeblood of the project. Follow these steps to secure the funds necessary to support the project through every phase. But first, we need to define what a project budget is.

What Is a Project Budget?

A project budget is the total projected costs needed to complete a project over a defined period of time. It’s used to estimate what the costs of the project will be for every phase of the project. Creating a project budget is a critical part of the project planning process.

The project budget will include such things as labor costs, material procurement costs and operating costs. But it’s not a static document. Your project budget will be reviewed and revived throughout the project, hopefully with the help of project budgeting software .

Why You Need a Project Budget

The obvious answer is that projects cost money, but it’s more nuanced than that. The project budget is the engine that drives your project’s funding. It communicates to stakeholders how much money is needed and when it’s needed. Project budgets are important for any industry such as construction , marketing or manufacturing, for example.

But a project budget is not only a means to get things that your project requires. Yes, you need to pay teams, buy or rent equipment and materials, but that’s only half the story.

The other part of the importance of a project budget is that it’s an instrument to control project costs. The budget, which is part of your project plan , acts as a baseline to measure your performance as you collect the actual costs once the project has been started.

budget allocation works

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  • Project Budget Template

Use this free Project Budget Template for Excel to manage your projects better.

Project Budget Example

To further illustrate how a project budget is created, let’s pretend we’re making an app. The first thing you’ll need to figure out is the costs of labor and materials. You’ll need programmers, designers, content developers, a dev team, etc. It helps list all the tasks and assign the team to them—a hallmark of good task management . This way every penny is accounted for.

With the tasks broken down for the project and your team in place, you’ll next need to look into whatever materials will be needed. Will they need laptops, other devices and equipment? This must be accounted for.

Now note other line items. There might be travel expenses and renting space to house the team. Then there are fixed items that are true for any project. These are things where the cost is set and won’t change over the course of the project. You’ll also want a column for any miscellaneous costs that don’t fit elsewhere in the budget.

Your budget must have a planned versus actual column. When you’re making that app you’ve likely to pivot and that is going to impact the budget. These columns are a way to track the expenditure to ensure you’re staying on budget.

If you want help getting your budget together, ProjectManager has a template that lays out most of the basics for you. For additional support, try our free project budget template.

project budget template

What Is Project Budgeting?

Project budgeting is the process of estimating the full cost of the project from the very beginning until the end. The project budgeting process involves the following:

  • Budget planning: Estimating costs and making a budget based on a project estimate
  • Budget tracking: Keeping track of project expenses during the project execution phase
  • Project budget management: Setting guidelines and control procedures to guarantee that costs don’t exceed the project budget

Project Budgeting Approaches

There are four project budgeting approaches: analogous, parametric, top-down and bottom-up . Analogous is an estimating technique that uses historical data to help determine the cost of the current project. It looks at past projects that are similar to figure out the cost and duration of the new project. This is a popular choice when there’s little data available for the project, making accurate estimates difficult.

Parametric estimating is a statistical approach to estimating the time, cost and resources for a project . It uses historical data, but also statistical data, to make a more accurate estimate. Top-down estimating is when the organization sets the cost and/or the duration of the project. With that figure in mind, the project manager seeks expert opinions to help determine the budget. Finally, bottom-up estimating is working from the lowest possible level of detail. It builds up the estimate from the work package .

What Is Project Budget Management?

Project budget management is a process by which the finances related to the project are administered and overseen. It goes beyond estimating the cost of completing the project and includes tracking those costs and much more. Some of the aspects of project budget management include how you’ll estimate the cost of the project and how those costs will be spread across the life cycle of the project . You’ll need to determine the metrics and the method by which you’ll track those costs to keep to the budget.

Reporting on the budget is also part of project budget management, including how you’ll do it and the frequency with which you’ll do it. If you find you’re going over budget, you’ll need to come up with a plan to rein the budget back in. You’ll even need to define a process of learning from historical data.

Project management software simplifies project budgeting and project budget management. Take ProjectManager;  all you have to do is open up the settings on your Gantt and set a budget baseline. Now you have the planned effort saved and you can use budget tracking features such as real-time dashboards to compare it to your actual effort as you execute the project. You can reset the baseline as many times as you need during the project to always be able to measure your project variance instantly. Get started today for free.

ProjectManager has a dynamic Gantt chart that sets baselines and much more.

How to Make a Project Budget

As noted, there are many components necessary to build a budget, including direct and indirect costs, fixed and variable costs, labor and materials, travel, equipment and space, licenses and whatever else may impact your project expenses.

To meet the financial needs of your project, a project budget must be created thoroughly, not missing any aspect that requires funding. We’ve outlined seven essential steps toward creating and managing your project budget:

1. Use Historical Data

Your project is likely not the first to try and accomplish a specific objective or goal. Looking back at similar projects and their budgets is a great way to get a headstart on building your budget.

2. Reference Lessons Learned

To further elaborate on historical data, you can learn from their successes and mistakes. It provides a clear path that leads to more accurate estimates. You can even learn about how they responded to changes and kept their budget under control. Here’s a lessons learned template if you need to start tracking those findings in your organization.

3. Leverage Your Experts

Another resource to build a project budget is to tap those who have experience and knowledge—be they mentors, other project managers or experts in the field. Reaching out to those who have created rough order of magnitude estimates and budgets can help you stay on track and avoid unnecessary pitfalls.

4. Confirm Accuracy

Once you have your budget, you’re not done. You want to look at it and ensure your figures are accurate. You can use our project budget proposal template for this process. You can also seek those experts and other project team members to check the budget and make sure it’s right.

5. Baseline and Re-Baseline the Budget

Your project budget is the baseline by which you’ll measure your project’s progress once it has started. It’s a tool to gauge the variance of the project. But, as stated, you’ll want to re-baseline as changes occur in your project. Once the change control board approves any change you need to re-baseline.

6. Update in Real Time

Speaking of changes, the sooner you know about them, the better. If your project planning software isn’t cloud-based and updating as soon as your team changes its status, then you’re wasting valuable and expensive time.

7. Get on Track

The importance of having a project management software that tracks in real time , like ProjectManager , is that it gives you the information you need to get back on track sooner rather than later. Things change and projects go off track all the time. It’s the projects that get back on track faster that are successful.

If you manage your project expenses using these building blocks you’re going to have a sound foundation for your project’s success.

Project Budget vs. Project Estimate

We’ve spent a lot of time talking about project estimates, but how do they differ from the project budget? A project estimate is what you think the project will cost. It’s the first step when making a project budget, so you want that project estimate to be as accurate as possible. Once you’ve done the research, looked at historical data and all the activities and resources needed to execute them, you’ll submit that estimate to be approved as your budget. But it’s only a guideline, while the project budget is a firm figure.

budget allocation works

Project Budget vs. Budget Proposal

Again, when you’re talking about a project budget you’re talking about all the expenditures that are needed to deliver the project. It defines how the money for the project will be allocated. A budget proposal , on the other hand, is the best estimate of the costs required to complete the project. It’s similar to the aforementioned project estimate in that it’s the final project estimate, the one that’ll be presented to stakeholders. They’ll then determine if the figure matches what they think is viable and either approve it or reject it.

budget allocation works

More Project Budgeting Templates

Project budgeting is one of the most important aspects of project management, no matter what industry you’re in. However, your project budget might look slightly different depending on the type of project you’re managing. Here are some free project budgeting templates for marketing, event planning and construction.

Marketing Budget Template

This marketing budget template is a great tool to start creating accurate baselines for your marketing campaigns. You can customize it to fit the needs of your team.

Event Budget Template

Like a project, an event requires resources that cost money. This free event budget template helps you list down the costs related to your event such as equipment rental, materials and labor.

Construction Estimate Template

Estimating the costs of a construction project is one of the most important construction planning activities there are, as an accurate cost estimation allows construction firms to make sure their project is not only feasible, but profitable. This free construction estimate template is a great tool to start estimating the costs of your construction project.

Project Budgeting Tips

A project budget is extremely important; without the funds to execute a project, it’s dead in the water. We’ve explained what a project budget is, and how to make one and we’ve provided examples. But when you’re in the thick of it, you need tips. These will help you with project budgeting.

  • Document your process when putting together a budget. Documents are essential for tracking the project and reviewing the outcomes.
  • Create contingencies. Have a plan B in place. There will always be unexpected costs, delays and other issues that’ll impact your budget.
  • Project budgeting is a team effort. Seek advice from your team, as they’re the ones with experience executing projects. Meet with experts who can provide you with guidance. Any person or organization that has insight should be tapped for their expertise.
  • Know your resources and their associated costs. This includes any maintenance required for equipment, and don’t forget your team is also a resource. Know their availability, overtime potential and other overhead costs.
  • When estimating costs don’t forget about task duration. These are also estimates and can greatly impact the budget.
  • The budget is a great tool for tracking performance. It can even be used as a communication tool for teams across departments.

ProjectManager Helps Projects Stay on Budget

ProjectManager is online project management software. That means we deliver data instantly to our real-time dashboard, so you can monitor your project across six metrics. When actual costs vary from your planned budget, you know faster and can respond quicker.

ProjectManager's Dashboard with cost metric popup

You can also plan your budget on our software, adding expenses and then use our resource management feature to assign resources, workforce and hourly rates, which are automatically added to your project. Add expenses at the task level with our Gantt chart , and report on expenses at the task level, too.

ProjectManager's Gantt with costs on bottom

Video: Project Budgeting Tips

It’s clear that building an accurate budget is key to setting up your project to succeed. Why not take a moment to listen to our resident project management expert Jennifer Bridges, PMP, who explains how to build a project budget in this tutorial video.

Thanks for watching!

Pro tip: Be sure to track the budgeted vs. actual costs when you’re in the project to see if you’re adhering to that budget. Because after you make a budget, you have to know how to manage it .

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  • Budget Reports

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Karnataka Budget 2024: CM Siddaramaiah finishes more than 3-hour long speech

Karnataka Chief Minister Siddaramaiah presents the State Budget 2024-25 in the Assembly in Bengaluru on Friday.

Karnataka Budget 2024: Karnataka CM Siddaramaiah finished his 15th budget presentation in a little more than three hours on Friday. He began the speech by quoting influences from the state, quoting a song from Dr Rajkumar's film Bangarada Manushya and also a Vachana by Lingayat philosopher Aydakki Lakkamma. The Karnataka Budget announcement began at 10:15am this morning and ended at around 1:30pm. The budget outlay stands at ₹ 3.71 lakh crore this year. ...Read More

This budget announcement also comes months ahead of the crucial and much-anticipated Lok Sabha election later this year. CM Siddaramaiah announced major allocations to minority, women and child welfare, as well as Bengaluru development - both infrastructure and traffic control - and the five main poll guarantees of the Congress party, among others.

CM Siddaramaiah finishes budget speech in little more than three hours

Karnataka CM Siddaramaiah finished his 15th budget presentation in a little more than three hours on Friday with “Jai Hind, Jai Karnataka”.

7 sewage treatment plants to be upgraded at ₹441 crore

Further in terms of drinking water supply, CM Siddaramaiah said seven sewage treatment plants (STP) will be upgraded at a cost of ₹ 441 crore, and that the phase-II of drinking water supply scheme to 110 villages added to BBMP limits will be implemented at a cost of ₹ 200 crore.

Govt allots ₹5,550 crore for Cauvery phase-5 project to supply drinking water

In May, 2024, Bengaluru Water Supply and Sewerage Board will operationalize Cauvery Phase-5 project of 775 MLD capacity to provide 110 litres of drinking water daily to 12 lakh people, at an estimated cost of Rs. 5,550 crore, the budget document stated.

Traffic Signal Control System to be installed at 28 major junctions in Bengaluru

In collaboration with the Japan Government, Area Traffic Signal Control System will be installed at 28 major junctions in the Bengaluru city by using state-of-the-art technology thereby reducing vehicle density at traffic signals by 30% and average delay by 13%, the budget statement said.

CM announces ₹15,611 crore for Namma Metro phase-3

In a bid to promote public transport in the heavily congested city of Bengaluru, CM Siddaramaiah announced the following measures:

  • The State Government has accorded administrative approval for works under Namma Metro Phase-3 at an estimated cost of ₹ 15,611 crore. Approval of the Central Government is awaited.
  • As many as 1,334 new electric buses and 820 diesel buses will be added to the Bengaluru Metropolitan Transport Corporation's (BMTC) fleet in the coming days.

Bengaluru infra works: Skydeck, Namma Metro get boost

“Internationally renowned architects have been invited to prepare a novel design for constructing a 250 meters high Skydeck in Bengaluru. It will become a landmark tourist destination in the city,” The budget document stated.

The CM also announced that an additional 44 km of metro line will be added to the existing 74 km by March 2025. “Namma Metro Rail project which is the one among the best metro services in the country, is the lifeline of Bengaluru city’s transport system. Every day, more than eight lakh people use metro services,” He said.

All-weather roads, Peripheral Ring Road project at ₹27,000 crore: Here's what's in store for Bengaluru this year

The government will also be constructing all-weather roads in Bengaluru by utilising space available within the canal buffer zone. “Under this scheme, a 100 km road is already being developed at the cost of ₹ 200 crore. Additional 100 km roads will be developed during this year,” CM Siddaramaiah said.

Under the Peripheral Ring Road (PRR) project, the government is planning to construct a 73-km road at a cost of ₹ 27,000 crore under the PPP model. The project will begin within the year, the budget document stated.

Siddaramaiah closes in on ‘Brand Bengaluru’, says focus is on reducing traffic

“Brand Bengaluru”: The Siddaramaiah-led government is focusing on reducing traffic congestion, construction of quality roads, supply of clean drinking water, and better public transport to create a clean and beautiful Bengaluru this year.

Here are the main measures being taken up:

  • White-topping of major roads of 147 km length at a cost of ₹ 1,700 crore to be completed before December 2025.
  • Construction of underground tunnels on a pilot basis at the infamous Hebbal junction where there is high traffic congestion.
  • It is proposed to reposition the Peripheral Ring Road (PRR) as Bengaluru Business Corridor to address traffic congestion and to promote large scale economic activities.

₹5,000 crore set aside for development of Kalyana Karnataka region

It is proposed to implement schemes to the tune of ₹ 5,000 crore under Kalyana Karnataka Region Development Board to emphasise on infrastructure development during the year 2024-25.

Pilgrimage destinations to be developed; Christians get highest allocation of ₹200 crore

  • ₹ 20 crore will be provided to provide basic facilities at major pilgrimage destinations in the state.
  • Construction work of Mangaluru Haj Bhavan will be undertaken at a cost of ₹ 10 crore.
  • A provision of ₹ 50 crore will be made for the development of major pilgrimage destinations of Jains.
  • ₹ 200 crore will be provided for the development of Christian community.
  • Tripitakas, the sacred texts of Buddhist community, will be translated into Kannada.
  • ₹ 2 crore will be provided for the formulation of targeted schemes aimed at financial empowerment of Sikligar community.
  • Shri Nanak Jhira Saheb Gurudwara in Bidar will be given a development grant of ₹ 1 crore.

₹100 crore allocation to develop Wakf properties across the state

“An allocation of Rs. 100 crore will be made for development of wakf properties. There will be a special focus on protection and conservation of protected monuments which are maintained by the ASI,” The budget document stated.

Education for the minorities: A closer look

  • 50 Morarji Desai Residential Schools will be started with a capacity of 50 students each.
  • 100 Post-matric boys/girls hostels will be started with a capacity of 100 students each.
  • 100 new Maulana Azad Schools will be opened.

Seven new taluk hospitals to be constructed at ₹280 crore

Anekal, Nelamangala, Hoskote, Shringeri, Khanapura, Shirahatti and Yelandur are set to get 100-bedded taluk hospitals at a cost of ₹ 280 crore.

Siddaramaiah aims to attract ‘global talent’ in AI, semiconductors, robotics & automobile sectors

“Bengaluru will be transformed into a truly global city with world-class infrastructure. We will work to attract global corporate talent in the emerging areas within the IT and BT sector, Artificial Intelligence and Robotics, Semi-Conductors, Automobiles and other sunrise sectors. In this field, we will lead the country by example. This is our Kayaka,” CM Siddaramaiah said.

CM Siddaramaiah leans toward increasing class strength in govt schools

In the realm of education, CM Siddaramaiah said Class 6 will be started in all schools functioning from 1st to 5th standard, and Class 8 will be started in all schools functioning from 1st to 7th standard. The strength of students in each class will be increased from 25 to 40, he added.

Siddaramaiah presents revenue deficit budget, defends it by saying…

“Though I have presented a revenue deficit budget, I have increased allocation for welfare programmes to ₹ 1,20,373 crore,” Karnataka CM Siddaramaiah said on Friday.

Meanwhile, BJP MLAs held a protest at the Vidhana Soudha over the Karnataka budget. Leaders from the saffron party staged a walk out from the state Assembly during the budget presentation.

Bengaluru to get destitute shelter at ₹10 crore, Mother and Child Hospital at ₹150 crore

A Nirashritara Parihara Kendra (Destitute Shelter) will be set up in East Bengaluru in view of the rapid growth of the city and rising number of destitutes. This will be constructed at a cost of ₹ 10 crore and have a capacity of 500 persons, the budget statement read.

A Mother and Child Hospital building and other infrastructure facilities at the premises of K.C. General Hospital in Bengaluru will be taken up at a cost of ₹ 150 crore, it added.

₹2,710 crore for construction of SC/ST, Backward classes school and hostels

“For construction of Scheduled Caste, Scheduled Tribe, Backward Classes and Minority Residential Schools and Hostels, a total of Rs. 2,710 crore has been provided. A total of 29 residential school complexes belonging to various departments will be constructed at an estimated cost of ₹ 638 crore,” CM Siddaramaiah further announced.

Siddaramaiah allots ₹39,121 crore for welfare of SC/ST community

CM Siddaramaiah also pushed for welfare of the SC/ST community by allotting ₹ 27,674 crore for the Scheduled Caste Sub-Plan in 2024-25 and ₹ 11,447 crores for the Scheduled Tribe sub-project, mking up a total of ₹ 39,121 crore.

Women & child welfare gets huge allocations at ₹86,423 crore, ₹54,617 crore respectively

The Siddaramaiah-led government in Karnataka has decided to allot large chunks of this year's budget to the welfare of women and children, at ₹ 86,423 crore and ₹ 54,617 crore, respectively.

Minorities in focus: Here are the main allocations for specially-abled persons, gender minorities, devadasis

  • Two-wheelers will be distributed in 2024-25 to 1,500 special persons who are yet to be provided motorized two-wheelers.
  • In order to improve the lives of gender minorities, the massage provided under the Maithi Yojana will be increased from ₹ 800 to ₹ 1,200. The process of identification and issuance of IDs will also be simplified.
  • Various programs will be implemented for the welfare of ex-devadasis, with the current monthly fixed payment to be increased from ₹ 1500 to ₹ 2000.

CM Siddaramaiah vows to develop the Anganwadi scene, pledges ₹300 crore

Anganwadi centres are set to be developed this year. Here are the measures announced by CM Siddaramaiah for the cause:

  • ₹ 10 crore for organizing training workshops for 20,000 Anganwadi workers and helpers for capacity building in early childhood education and care.
  • ₹ 90 crores to facilitate activities carried out through Anganwadi. As mnay as 75,938 smart phones will be provided to Anganwadi workers and supervisors at the cost.
  • ₹ 200 crore to be provided to construct buildings to carry out Anganwadi activities as 1,000 Anganwadis are currently functioning in rented buildings.
  • Gratuity benefits will be given to Anganwadi workers and helpers.

₹28,608 crore for Gruha Lakshmi scheme

On the Congress government's Gruha Lakshmi scheme, which is part of the party's five main poll promises, CM Siddaramaiah said, “1.33 crore women are being benefited. Till the end of January, 1.17 crore women have registered under the scheme and so far ₹ 11,726 crore has been directly transferred to the accounts of the beneficiaries. ₹ 28,608 crore in the year 2024-25 will be provided. This leads to family maintenance as well as income generation.”

₹2,000 crore allotted for development of canals in Varuna constituency

₹ 2,000 crore has been allotted for the development of canals in Varuna assembly constituency, namely, for the Gubbia Mathadahalli drinking water project and the Arkavati River Front Development projects near Ramanagara.

The Karnataka government has further allocated ₹ 365 crore to fill water from Bhima and Kagina rivers to the Benne Thora Reservoir for drinking water supply to Kalaburagi city.

‘ ₹970 crore for drinking water, Antar Jal development’: CM Siddaramaiah

CM Siddaramaiah announced allocations to develop water resources in the state, saying, “The project of filling 38 lakes of Yalaburga-Kukanur taluk of Koppal district for drinking water and Antar Jal development has been budgeted at a cost of ₹ 970 crore in the current year. ₹ 990 crore from Narayanpura canal to Pamanakallur and other areas of Maski taluk of Raichur district. A project to provide irrigation facilities will be taken up in the sum.”

‘ ₹100 crore to develop tourism near Anjanadri Hills’: CM Siddaramaiah

"Tourism policy will be revised for 2024-29 to attract more tourists and investors to make full use of the tourism potential of the State. Anjanadri Hills and surrounding areas of Koppal district hold mythological and historical importance, ₹ 100 crore will be provided to develop tourism in these areas," Karnataka CM SIddaramaiah said. (ANI)

CM Siddaramaiah attacks Centre in Budget speech, causes uproar in the House

CM Siddaramaiah attacked the Centre in his budget speech by saying, "While introducing Goods and Services Tax, Union Government had assured that there would be growth of 14% and states would be compensated in case of shortage in revenue growth. At a projected growth rate of 14%, it was estimated that the GST tax collection would be Rs. 4,92,296 crore from 2017 to 2023-24. However, only ₹ 3,26,764 crore GST revenue was collected and against the GST shortfall of Rs. 1,65,532 crore, the Central Government had released ₹ 1,06,258 crore as compensation to the state. Hence, a loss of ₹ 59,274 crore was incurred by the state due to unscientific implementation of GST in the last 7 years." (ANI)

CM Siddaramaiah continues budget speech amid BJP uproar, slogans in the house

The opposition BJP in the house on Friday opposed Karnataka CM Siddaramaiah's budget speech for accusing the Centre of denying the state government's request for funds repeatedly. BJP Legislative party leader R Ashoka and other BJP lawmakers expressed disapproval at the CM amid his speech. Siddaramaiah however continued to present the budget amid BJP uproar in the house.

50 women-run cafes across the state at ₹7.5 crore: CM Siddaramaiah

Karnataka CM and Finance Minister Siddaramaiah said, "50 women-run cafes with the name of Cafe Sanjeevini will be launched across the state during this year for ₹ 7.50 crore. These canteens will cater to the demand and supply gap in rural areas for healthy, hygienic and affordable cooked food and traditional local cuisine." (ANI)

Budget size stands at ₹3.71 lakh crore this year

“I am happy to present the budget when India is celebrating 75th Independence Day. All five guarantees have started and reched the beneficiaries. More super speciality hospitals will be built in the next five years,” CM SIddaramaiah said. This year's budget size stands at ₹ 3,71,383 crore.

CM Siddaramaiah quotes vachana by Linagayat philosopher Aydakki Lakkamma

CM Siddaramaiah on Friday started off his 15th Budget speech by hitting out at the Centre for criticising his government's guarantees and quoted a vachana by female Sharana Aydakki Lakkamma. "I have faith on guarantee schemes. We have done what centre has failed to do," He said.

‘Aagadu Endhu, Kailagadhu Endhu’: CM Siddaramaiah begins Budget speech with Dr Rajkumar's film song

Karnataka CM Siddaramaiah starts his 15th Budget speech with quoting the famous "Aagadu Endu, Kailagadu Endu" song from late Dr Rajkumar's Bangarada Manushya movie.

₹58,000 crore allocation expected for Cong's five guarantees

Among other expectations, CM Siddaramaiah is likely to allot funds in support for the Banjara, Valmiki, Bhovi, Madiga and other backward communities. As much as ₹ 58,000 crore is set to be kept aside to fulfil the Congress party's five main guarantees - Gruha Lakshmi, Gruha Jyoti, Anna Bhagya, Yuva Nidhi, Shakti schemes.

Funds for Rama mandira, new districts, backward communities likely

Ahead of CM Siddaramaiah's budget announcement, here are some last minute expectations:

  • Government servants are likely to get 7th pay commission pay scale and other benefits.
  • Chikkodi, Gokak and Madhugiri could be made into new districts.
  • Support to women and minority communities expected.
  • ₹ 100 crore for Ramamandira
  • Either Bengaluru or Kalaburgi to get Vachana Mantapa or Vachana Vishwavidyalaya (Vachana University)

This time also our slogan is ‘An Equal Life for All, An Equal Share for All’: K'taka Cong working prez Saleem Ahmed

On the upcoming Karnataka Budget 2024, state Congress working president Saleem Ahmed said, "We expect a good budget from the government...this time also our slogan is ‘Sarvarigu Samapalu, Sarvarigu Samabalu’ (An Equal Life for All, An Equal Share for All)". (ANI)

Siddaramaiah arrives at Vidhana Soudha, to surpass his own record of presenting highest number of budgets

CM Siddaramaiah arrived at Bengaluru's Vidhana Soudha and is set to begin his budget speech shortly. He is all set to surpass his own record of presenting the highest number of budgets by any finance minister in the country. Moraji Desai had presented 10 as a Union Finance Minister, and Chidambaram had presented nine budgets.

Karnataka budget 2024: Here are five main expectations

  • The state government is likely to increase excise duty on liquor and the price hike on tobacco products.
  • Funds are expected to be allocated to the Namma Metro as well as the Peripheral Ring Road (PRR) projects to ease traffic bottlenecks in Bengaluru city.
  • The government may also take up legalising of property papers. No loan waivers are expected as of now.
  • ‘Brand Bengaluru’, Mekedatu reservoir project to get boost.
  • Huge allocation of funds to the agricultural sector. Governemnt is also expected to provide drought relief to farmers.

Huge allocation expected for infra projects, Bengaluru development

Bengaluru is also expected to be allotted a good amount by the state government as many infrastructure projects are going on and a few new ones have also been announced. The state government is taking pride in projects like Namma Metro and Peripheral Ring Road which could potentially be solutions to Bengaluru’s longstanding traffic problems.

Priyank Kharge pushes for ‘Vachana Mantapa’ ahead of state budget

Ahead of the Karnataka budget 2024, state IT/BT and RDPR minister Priyank Kharge sought for the establishment of a ‘Sharana Vachana Mantapa’, a library solely dedicated to the vachanas of social reformer and philosopher Basavanna and all the Sharanas, according to News 18.

CM Siddaramaiah leaves for assembly to present Karnataka Budget 2024

Cm siddaramaiah prepares for his 15th budget announcement | pics.

Dr K Govindaraj, the political secretary to the CM, took to social media on Thursday night and said, “Ahead of Karnataka Budget 2024, CM Siddaramaiah prepares for his 15th budget speech. The state of Karnataka eagerly awaits for the budget from its beloved Chief Minister!”

‘This budget will be very hopeful’: Karnataka DCM DK Shivakumar

Karnataka Deputy CM DK Shivakumar spoke on the budget announcement expected today and said, “The budget will give a new direction to our state towards development. We have undertaken many visionary programs. Tomorrow, CM will present the budget at 9.15 am, this budget will be very hopeful.” (ANI)

Karnataka Budget 2024 to be announced today: What can we expect?

In the absence of normal rain conditions across the state last year, Karnataka is grappling with severe drought conditions. In this light, a substantial allocation to the agricultural sector is anticipated. CM Siddaramaiah had earlier also requested Prime Minister Narendra Modi to release relief funds from the central government. Read more here

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Asaba Metro News

Asaba Metro News

Delta Ministry of Works and Special Projects led by Mr. Charles Aniagwu Defend 2024 Budgetary Allocation

Delta 2024 Budget: Works, Special Projects, DLA Defend N152.5billion Allocation

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More government Ministries, Departments, and Agencies, MDAs on Tuesday, December 5, 2023, appeared before the Standing Committees of the Delta State House of Assembly to defend their 2024 budget proposals.

The officials in their presentations briefed the Lawmakers on the budget performances of the MDAs in the outgoing year and defended their proposed plans for 2024.

Describing budget defense by the Standing Committees of the State Assembly by government Ministries, Departments, and Agencies as constitutional, the Chairman House Committee on Works and Special Projects, Hon. Oboro Preyor, said the annual exercise was meant to help MDAs fast-track their budget allocations.

Hon. Preyor who represents Bomadi constituency in the House, explained that budget defence does not only foster transparency but also promotes accountability which he said was the hallmark of good governance.

The Lawmaker stated that ministries appearing before standing committees should see themselves as partners in progress to foster economic progress.

Delta Assembly Works Committee

Delta Assembly Works Committee

Preyor, emphasized that the session was geared towards transparency which would help to strengthen the actualization of electioneering promises to the people of the State.

Commissioner for Works, Rural and Riverine Roads, Charles Aniagwu, who spoke on behalf of himself and the two other Commissioners in the Ministry of Works, Reuben Izeze, Highways and Urban Roads and Funyei Manager, Special Projects, told the Committee that the sum of N150billion has been proposed for Capital expenditure and over N500 million for recurrent expenditure.

He disclosed that within the past eight years, the Ministry had executed more than 912 projects with a total value of N886.9 Billion between May 2015 and November 2023.

According to Aniagwu, “The projects include 2,146,45 kilometers of roads and 1,251.80 kilometers of drainage channels. The balance amount required to complete all the projects undertaken is N389.3 billion.”

According to him, the road projects embarked upon in the three senatorial districts of the State will be vigorously pursued to completion in actualization of the MORE agenda of the present administration in the state.

Mr. Aniagwu explained that Works is a key sector in development, disclosing that in the year under review, the Ministry intends to enhance job creation and the evacuation of farm produce from agrarian rural communities to storage and processing centers with multiplier effects of boosting agriculture and industrialization.

He emphasized that the Ministry through its core mandate also intends to check youth restiveness through meaningful engagement of the people, engender wealth creation, enhance accessibility to health and educational institutions in urban and remote areas as well as improve the network of inter- intra-city roads in the state.

The Works Commissioner noted that the galloping inflation, decline in the value of the naira, unpredictable construction season due to global warming and funding have been major challenges in the smooth running of the Ministry.

Delta State Government Media Establishments defend 2024 budgetary allocation

Delta State Government Media Establishments defend 2024 budgetary allocation

Aniagwu commended members of the Assembly Committee on Works and Special Projects for their support.

The Works Committee also met with the Management of the Direct Labour Agency led by the Acting Director General, Engr. Henry Emonena.

Chairman of the Committee, Oboro Preyor, charged the officials to live up to the Government’s expectation of being an interventionist agency.

He said, “We are working hard to ensure that DLA is revived. This is because, as an interventionist agency, DLA has much to do for Deltans.

“We are aware of what has gone wrong at the Agency. However, we are not going to probe into the past, but to advise that you turn a new leaf and work on your attitude as staff of the agency.

“My advise to you as chairman of this committee is for you to ensure that whatever fund that may be appropriated should be managed appropriately.

“Again, you should be ready to address your image problem. We know what transpired within the agency, but we are appealing to you to turn a new leaf.

“There is no doubt that this present government is ready to revitalize the Agency, but you must assure us that you will be prudent and transparent in all your dealings,” Preyor said.

The Director General Mr. Henry Emonena had told the Committee that N24 million budget proposal was for regular overhead while N2 billion for Capital expenditure.

2024 Delta Budget Defence

The House Committee on Information which has the Majority Leader of the State Assembly, Hon Emeka Nwaobi as the Chairman, met with the managements of the State Ministry of Information, the two government-owned broadcast stations, Delta Broadcasting Service, DBS Asaba and Warri, and the Pointer newspaper with the functioning Permanent Secretary in the Ministry, Mr. Lucky Omokri as head of the team.

Speaking with newsmen immediately after the session, Hon Emeka Nwaobi said the state government is determined to beef up DBS and Pointer newspaper operations to ensure excellent services.

Nwaobi stated that a uniformed society is as good as being blind to the realities of the times, especially government activities, and promised the commitment of the State Legislature to promoting efficiency in the media establishments.

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Follow our news, recent searches, cna explains: how will the closure of cpf special accounts affect those 55 and older, advertisement.

What exactly was announced by Deputy Prime Minister Lawrence Wong at Budget 2024, and why did the government move to address what experts are calling a CPF "anomaly"?

Senior citizens in Singapore watch a checkers game. (File photo: AFP/ROSLAN RAHMAN)

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budget allocation works

SINGAPORE: A slew of changes to the Central Provident Fund (CPF) system - a savings plan for Singaporeans - was announced at Budget 2024 on Friday (Feb 16).

And among them, the decision to close Special Accounts - meant for retirement savings and investments - for those aged 55 and older drew strong reactions online.

Some complained about lower interest rates of the Ordinary Account - typically used for housing and education - and restrictions on withdrawing savings.

Others however pointed out that funds in Retirement Accounts earn the same interest rates as in Special Accounts.

How will the closure work?

When CPF members reach the age of 55, their savings are transferred to a newly created Retirement Account. The amount transferred can go up to what’s known as the Full Retirement Sum - which is two times the Basic Sum as calculated with reference to Singapore's Household Expenditure Survey.

The Full Retirement Sum provides an ideal point of reference as to how much one needs in retirement.

Savings from Special Accounts are transferred first, followed by funds from Ordinary Accounts.

But from 2025, Special Accounts will be closed for those at least 55 years old.

If there’s still money in a Special Account at this point, it will be transferred to the Retirement Account.

budget allocation works

Both the Special Account and Retirement Account currently earn 4.08 per cent interest per annum. The Ordinary Account earns 2.5 per cent per annum.

For those who are still working, the share of their CPF contributions which would normally be deposited in the Special Account will go into the Retirement Account instead. 

If the Full Retirement Sum has already been reached in the Retirement Account, funds that would usually be in the Special Account will be diverted to the Ordinary Account.

Why is the government doing this?

The Ministry of Finance said savings in the Special Account, some of which can be withdrawn anytime for members aged 55 and older, should not be earning a higher interest rate.

“As a principle, only savings that cannot be withdrawn on demand should earn the long-term interest rate, and savings that can be withdrawn on demand should earn the short-term interest rate,” said the ministry.

This view was echoed by economist Akshar Saxena from Nanyang Technological University.

“They wanted to align the trade-off between liquidity and the market return you get,” he told CNA.

“Traditionally, in bank accounts, if you have a fixed deposit account – which … you cannot withdraw from – you will get the highest amount of return.”

“In the (Special Account) there was this anomaly where you could withdraw the amount for your cash after (reaching the Full Retirement Sum), you could invest it, but you’re still getting very high returns,” Assistant Professor Saxena said.

“By now closing that, I think that anomaly has been removed.”

budget allocation works

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budget allocation works

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Who’s affected, and how.

One group to be impacted is CPF members who have already saved the Full Retirement Sum. Their Special Account funds and any new contributions will be channelled to their Ordinary Accounts, where they can withdraw any amount on demand. But as pointed out, they will earn lower interest rates than if their Special Accounts remained open.

One alternative is to use savings from the Ordinary Account to top up their Retirement Accounts to the Enhanced Retirement Sum – the maximum amount allowed – to earn higher interest rates, though withdrawals will be limited.

CPF Board said on Saturday that more than 99 per cent of members aged 55 and older will be able to transfer all their Special Account savings to their Retirement Accounts when the Enhanced Retirement Sum is raised to four times the Basic Sum next year.

Mr Alfred Chia, chief executive officer of the SingCapital financial advisory, noted that such a transfer is "irreversible".

Transfers to the Retirement Account will increase monthly payouts in future, but members born 1958 and after can only withdraw up to 20 per cent of their Retirement Account savings after they turn 65. This amount includes S$5,000 which they can withdraw from the age of 55. 

“For members who had enjoyed higher interest in (Special Accounts) with the flexibility of ‘on-demand withdrawal’, they will have to recalibrate their saving strategies,” said Mr Chia.

Another group of people affected would be those who invest their Special Account savings. After these accounts are closed, any proceeds will be paid to the Retirement Account, or Ordinary Account if the Full Retirement Sum has been reached.

And a small group who invest to prevent their Special Account savings from being transferred to the Retirement Account - a practice known as Special Account “shielding” - will also be affected.

These people typically liquidate their investments shortly after turning 55, to retain funds in their Special Accounts to enjoy the flexibility and higher interest rates.

“It only benefitted a very small segment of the population; very high-income individuals. It wasn’t really a policy intent,” said Associate Professor Walter Theseira of the Singapore University of Social Sciences.

“Removing this loophole is probably a good thing.”

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COMMENTS

  1. Budget Allocation: A Step-by-Step Guide

    The budget allocation tells employees (generally department heads) the maximum amount of money they can spend during the fiscal period, without having to seek approval from someone above them. How to Allocate Budget Across Departments Budget allocation as a concept is fairly straightforward, sure. But how do you actually go about it? Let's explore.

  2. How and When to Allocate Your Budgets to Stay Agile

    Budget allocations refer to the amount of money each department receives from the general fund to execute their strategic plans. Budget allocation breaks department spend down into an approved maximum amount each department can spend per resource, whether it's on software, contractor or freelance assistance, or ad spend for a marketing campaign.

  3. The 50/30/20 Rule of Thumb for Budgeting

    Key Takeaways. The 50/30/20 rule of thumb is a guideline for allocating your budget accordingly: 50% to "needs," 30% to "wants," and 20% to your financial goals. The rule was popularized in a book by Elizabeth Warren and her daughter, Amelia Warren Tyagi. Your percentages may need to be adjusted based on your personal circumstances.

  4. 13 effective tips to allocate budget across departments

    Budget allocation is the process of designating specific amounts of money to each department within a company. How much money each group receives depends on: Company priorities Revenue projections Departmental needs These allocated budgets set spending limits for each department's operational costs, including: 🖥️ Software 💬 Marketing campaigns

  5. 50/30/20 Budget Calculator

    Our 50/30/20 calculator divides your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment. The 50/30/20...

  6. What is a Budget Allocation Plan

    A budget allocation plan is a blueprint of how much you can spend on a program, event, person, or product within an organization. Essentially, it is the amount allocated to expenditures, telling staff how much funding is available, and having them to stick to the allocations.

  7. Mastering Budget Allocation Management for Finance Teams

    Collaborative Budget Review. Effective budget allocation management involves collaboration among different departments and teams within the organization. Finance teams should work closely with department heads and managers to review budget allocations, discuss spending needs, and ensure alignment with organizational goals.

  8. Your Guide to How to Budget Money

    Allow up to 50% of your income for needs. Leave 30% of your income for wants. Commit 20% of your income to savings and debt repayment. Track and manage your budget through regular check-ins....

  9. How budgeting works for companies

    Updated May 16, 2021 Reviewed by Margaret James What Is a Budget? A budget is a forecast of revenue and expenses over a specified future period. Budgets are utilized by corporations,...

  10. How to Plan and Budget for Agile at Scale

    Take a venture capitalist approach to allocation. Instead of a single, cumbersome annual funding allocation, work from less-detailed business cases and reallocate funds more frequently. Investments start small. Additional resources go to ventures that perform well. Less fruitful efforts stop. Close the funding feedback loops.

  11. How to Make a Budget: Your Step-by-Step Guide

    Goodbye, money anxiety. Hello, money goals. Keep reading to see how to make it happen so you can make a budget that works for you. How to Make a Budget in 5 Steps No matter how you feel about budgeting right now, no matter what money goals you have, and no matter your income—you can make (and keep!) a budget in just five steps.

  12. How to Manage a Project Budget in 7 Easy Steps

    June 22, 2023 13min read Table of Contents What is a Project Budget? How to Manage a Project Budget in 7 Steps 1. Make a step-by-step project outline 2. List every required resource 3. Assign a cost to each resource 4. Add a contingency 5. Document your budget 6. Get your project budget approved 7.

  13. The 50/30/20 Budget Rule Explained With Examples

    Key Takeaways. The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split ...

  14. Step-by-Step Guide to Budgeting Process

    The budgeting process covers all the steps involved in determining and setting a budget, which can include: Reviewing past financial quarters and using the data to forecast future expenses and revenues. Developing a plan to manage the budget and implementing it. Allocate resources to cover the company's projects and departments.

  15. 5 Most Common Budget Models Explained

    1. Zero-Based Budget. Zero-based budgeting is where you start your budget with a clean slate each year. Every department has a starting budget of zero, and management decides how much they need based on their priorities and goals for the year. Essentially, you build a new budget from scratch every year.

  16. How to Allocate Your Marketing Budget Equitably

    Once the budget allocations are in place, the work doesn't stop there. I continuously monitor the performance of regions and teams against targets and remain flexible to make adjustments as needed.

  17. 50/30/20 Monthly Budget Calculator

    It'll be the basis for all of your calculations. For example, say your monthly take-home pay is $4,000. Applying the 50/30/20 rule would give you a budget of: 50% for mandatory expenses = $2,000 ...

  18. Lean Budget Guardrails

    Lean Budget Guardrails describe the policies and practices for budgeting, spending, and governance for a specific portfolio. SAFe provides Lean budgeting strategies that eliminate traditional project-based funding and cost accounting overhead. In this model, LPM maintains appropriate levels of oversight through allocating value stream budgets ...

  19. The federal budget process

    Annual funding areas The annual budget covers three spending areas: Mandatory spending - funding for Social Security, Medicare, veterans benefits, and other spending required by law. This typically uses over half of all funding. Discretionary spending - federal agency funding. Congress sets funding levels for these each year.

  20. How to Make a Project Budget: Project Budgeting Basics ...

    by Jennifer Bridges | May 10, 2023 Make a project budget and stick to it with ProjectManager. Plan projects, manage resources and track costs with powerful features the whole team can use. Get started for free If you don't have the funds, you're not going to complete the project successfully.

  21. Budgeting Allocation Tips to Run a Smart Business

    Budgeting Allocation Tips to Run a Smart Business — Budgetry Take a look at budgeting allocation tips for business owners that will help you run your business easier and keep it financially healthy.

  22. What Should Your Household Budget Percentages Be?

    According to CNBC, the average person spends about $164.55 per day when accounting for expenses like housing, food, cell phone bills, etc. Making a budget and tracking your spending can help you get a better handle on your finances and give you more confidence in your financial situation.

  23. Karnataka Budget 2024: CM Siddaramaiah finishes more than 3-hour long

    Karnataka CM Siddaramaiah finished his 15th budget presentation in a little more than three hours on Friday with "Jai Hind, Jai Karnataka". Feb 16, 2024 8:16 AM IST 7 sewage treatment plants ...

  24. Ministry of Works, Special Projects, DLA Defend 2024 Budget Allocation

    Delta 2024 Budget: Works, Special Projects, DLA Defend N152.5billion Allocation. More government Ministries, Departments, and Agencies, MDAs on Tuesday, December 5, 2023, appeared before the Standing Committees of the Delta State House of Assembly to defend their 2024 budget proposals. The officials in their presentations briefed the Lawmakers ...

  25. CNA Explains: How will the closure of CPF Special Accounts affect those

    SINGAPORE: A slew of changes to the Central Provident Fund (CPF) system - a savings plan for Singaporeans - was announced at Budget 2024 on Friday (Feb 16).