Decribe how you can apply financial budget, cash budget, cas

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Decribe how you can apply financial budget, cash budget, cash disbursement to help yout family's finacss

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Decribe how you can apply financial budget, cash budget, cash disbursement to help yout family's finacss. Explain in detail with exnaple.

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Financial budget like cash budget is a roadmap to reach at goal. If you don't know, where you have to go,
you will never reach there, where to want to go. So practical application of financial budget includes the
following:

(1) Firstly determine minimum cash balance need to keep in hand for any emergency situation
(2) Estimate monthly expenses to be incurred in following month
(3) Determined Investment to be done in following month
(4) Determined Monthly EMI and loan payment
(5) Determine current cash position and cash balance in hand at beginning
(6) Estimate net Finance as required by adding expenses and ending cash balance and reducing
beginning cash balance from it.

	$	$	$
Particulars	January	February	March
Beginning Cash Balance (a)	8,000	2,500	8,340
Less: Cashoutflow
Kitchen Expenses	500	500	500
Garden Expenses	100	100	100
General Home expenses	400	440	484
Investments	2,500	2,500	2,500
Loan EMIs	2,000	2,300	2,600
Total Cashoutflow (b)	5,500	5,840	6,184
	2,500	-3,340	2,156
Ending Cash Balance required (c )	5,000	5,000	5,000
Finace required (b + c -a)	2,500	8,340	2,844

As above three month cash budget is prepared based on the estimation that minimum cash balance of $ 5,000
required, monthly kitchen expenses $ 500, garden expenses $ 100 is estimated. Monthly general expenses
for first month estimated as 400 but expecting it will increase by 10% monthly. Monthly fixed SIP investment
is $ 2,500 and loan repaid 2000 in first month but it got enhanced as new finance taken. So finaly finance as
required found by reducing beginning cash balance from expenses and ending balance.

Cash budget will help us to control the expenses. Suppose if home owner decided that no finance shall be taken
and plan to reduce minimum cash balance for $ 1,000 to finance these expenses but risk factor will be there as
for medical safety purpose minimum cash balance of $ 1000 is very low. So home owner will plan to be ensured
with life insurance and buying medical insurance for emergency medical expenses if any. So revised cash budget
for the next three month will be like this.

(Revised Cash balance)	$	$	$
Particulars	January	February	March
Beginning Cash Balance (a)	8,000	1,000	5,000
Less: Cashoutflow
Kitchen Expenses	500	500	500
Garden Expenses	100	100	100
General Home expenses	400	440	484
Investments	2,500	2,500	2,500
Loan EMIs	2,000	2,300	2,600
Life & Medical insurance premium	1,500	1,500	1,500
Total Cashoutflow (b)	7,000	7,340	7,684
Ending Cash Balance (c = a-b)

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