Question

3) Once your business is operational, it's essential to plan and tighty manage its finansal performance. Creating a budgeting process is the most effective way to keep your business - and its finances-on track. There are three main components necessary for creating a cash budget. They are: Time period. Desired cash position. Estimated Sales and Expenses 1. Expected cash receipts. 2. Cash sales. 3. Collections of accounts receivable. 4. Other income. A cash budget is important for a variety of reasons. For one, it allows you to make management decisions regarding your cash position for cash reserve). Without the type of monitoring imposed by the budgeting process, you may be unaware of the cycle of cash through your business At the end of a year or a business cycle, a series of monthly cash budgets will show you just how much cash is coming into your company and the way it is being used. Seasonal fluctuations will be made clear. A cash budget also allows youto evaluate and plan for your capital needs. The cash budget will help you assess whether there are periods during your operations cycle when you might need short-temborrowing. It will also help you assess any long-term borrowing needs. Basically, a cash budget is a planning tool for management decisions. 40. Based on the above monthly personal cash budeer preparation-students need to analy59 and calculate the monthly savings, vearly savings and seven years saved money. (epproximately 300 worde)

Answer 1

Ans A. Monthly cash budget as an indicator for personal Finance growth.

A well disciplined and wise man always take care of his expenses and income.One aspect of earning is to save some cash for future needs. Saving  can be for marriage,medical treatment or raising family.Thus the competative environment has made persons take care of finances monthly. People are preparing cash budget themselves or professional help of wealth advisers .Few financial companies are providing this help.

Different aspects of Cash Budget include predicting future uncertainities, savings and analysing monthly cash flows.It assists in making decisions and strategies to fulfil the future growth.One can decide where to invest money or saving money. Good and wise planning secures our short term and long term goals.A person who has to pay loan EMI can forcast his spendings while one high saving can look for investment.

Monthly cash budget can secure person from unforeseen expenditures like medical expenses. It helps a person to become self reliant and self sufficient.

For example :

A person ,Say Chris, started to earn at the age of 24. He is employed in a MNC for 7 year. In the initial years of his earning ,his expenditure was more on luxury items and even had a habbit of borrowing money from his collegues at the time of need. For the first three years ,Chris had neither opened any saving account nor done any investments.In the forth year he decided to invest or save cash. He also planned to marry after two year. Chris realised that he had very less saving and thus stared to prepare Monthly Cash bugdet. At the end of a month , he analysed his expenditure and decided to shop less. From the next month ,he opened a reccuring deposit account for next two years. He is now self reliant and become disciplined.On the third year , he switched to another MNC . He looked for investment giving more returns than RD. He opened a SIP and term insurance for the welfare of his family.With his saving ,he managed to marry and SIP secures his future needs.

On the other hand , Emily also started his company in MNC and had planned to go abroad for higher studies. She was conscious about her spending from the begining.She prepared the monthly cash budget and started to focus in her growth. One day, she realised that she is not saving enough and changed his company. She was able to pick a higher package.With minimun spending on her enjoyment.After three years of saving she took admission in an abroad institution. Her saving take care her monthly expenditures .She secured a part time job,enough to save a little.After two years of graduation, she is earning a good amount of money. She is investing alot and have huge saving.

Answer 2. Second part of question requires to analyse and calculate monthly savings,yearly savings and seven years saved money.

Above section talks about saving pattern of Chris and Emily.

In this section we will discuss saving patterns of Chris.

Chris tends to enjoy his life and resorts to luxury spendings. (first three years)

monthly income = 20,000

Expendiures

house rent= 10000

Bills payable= 2000

Food expense= 5000

shopping= 8000

Borrowings= 5000

saving = Nil

In the above information we can analyse that the expenditures and borrowings are more than the monthly income which is not helping chris to go for savings.

Chris yearly savings (in 4th year)

Total salary = 360000 (hike in salary)

borrowings = nil

expenditure

house rent = 108000

food expenses = 48000

shopping = 20000

bills payable= 25000

saving = Total income-expenditures

360000 - 201000 = 159000

Chris continue to save in 5th year also.After Five years he switched to another MNC

In 6th year (savings of 7 year)

salary = 480000

borrowings = nil

expenditure

house rent = 108000

food expenses = 48000

shopping = 20000

bills payable= 25000

term insurance= 1000

saving = Total income-expenditures

480000 - 202000 = 278000

7 years of savings

1-3year = nil

4-5 year=318000

6-7 year= 556000

total seven year savings= 874000

Cocnlusion:

Chris has become more focused on investing and saving after he started preparing Monthly cash budgets. First three he was borrowing and returning money. Hence could not save a penny.

After checking budget he shifted to a less costly house, reduce his expenditure and focused on more saving. After two years of saving he thought of managing his wealh properly and started investing. He opened term insurance also which secure his family in case of his sussen demise.

With saving his hands he is able to spend on his marriage and is ready to face any unforseen situation.He is able to manage the monthly fluctuations easily and prevent himself from the burden of loans.

Thus saving is the crucial aspect of Monthly cash budgets.