So, finding the cause of avariance is vital to the implementation of an effective budget. And, the sooneryou determine the root of the disparity, the sooner you will be on track toimplementing your budget. Also, the variance may resultfrom a miscalculation of an individual’s income or expenses. An increase incost, or decrease in revenues can alter the outcome of your budget resulting ina difference between the actual figures and the expected ones.
Thesediscrepancies can find an explanation in factors such as inflation where yourpurchasing power is limited, or wages that have fallen due to pay cuts.Needless to say, all these factors are reasons for a variance in a budget, andthey need to be assessed accordingly for a successful budgeting.Once the budget is created, thenext step is to monitor the budget by comparing it to the actual data so thatyou will be able to notice any serious variance or deviation from the expectedoutcomes (Siegel & Yacht, 2009). Since, the expectations were based onknowledge from one’s personal data, any discrepancy could come from a factorthat was overlooked or ignored. Indeed, personal factors such as familystructure, health, career choice, and age have significant influence on financialchoices and can have a tremendous impact on your budget. Therefore, isolatingthe cause of the variance could be helpful as it will allow you to takeadequate measures to correct the budget.
In personal finance, a budget canbe defined as a plan that tracks and controls spending with the purpose ofcutting living expenses, or increasing savings. In order to create an effectivebudget, it is critical to assess all important factors pertaining to your life.And factors such as micro and macroeconomic ones, as well as expenses, andspending patterns should be given a closer look since they are the most helpfulinformation, you will rely on to build the budget.