Budget spending. Unbudgeted expenses and unfulfilled obligations Ways to calculate unforeseen costs
Hello girls!
I have already said that the best thing you can do with unexpected expenses is to make a knight's move and plan for them.
But, fortunately, life is such an interesting thing that you can’t plan everything. And you can't lay straw on every corner. Force majeure and unplanned expenses happen to everyone. Fact.
What to do in this case?
⇒ If the amount of unplanned expenses is small, I simply cut my Wife's Budget for the current month and refuse any planned expenses (do my own manicure / pedicure, postpone the purchase of a new kettle for the next month, go for a walk with the whole family not to the theater, but to a park…)
⇒ What if the amount is substantial and my Wife's Budget is simply too tough?
Nothing. For such cases, my financial rule works - I'm not the main one. The head of our family (including in financial matters) is my husband. And I have the right to count on his help. Seriously. I don't want to go to my neighbor.
⇒ This does not mean that I wash my hands and smoke on the sidelines, while my husband puzzles over where to get the extra 20 thousand. Such issues, of course, are resolved at our family council. But the last word is always with the spouse. If he says that due to unforeseen expenses, my Wife's Budget is halved. Or the vacation is cancelled. Or the purchase of a bunk bed for the nursery is postponed - well, ok. So be it.
But during the three years of the existence of our system, this has not happened, although force majeure has happened more than once.
My husband always solves such financial issues on his own, for which I am very grateful to him.
This is the beauty of sharing a household budget: big expenses are not my area of \u200b\u200bresponsibility.
Unforeseen expenses in business, every entrepreneur faces this to one degree or another. Any sane person, starting his own business, must clearly understand that in addition to income, the business will also bring costs.
In our article today, we will discuss the situation with unexpected expenses and how you can avoid them. I’ll make a reservation right away that the reasons for the occurrence of unforeseen expenses often depend on the activities of a particular enterprise, but still there are a number of reasons that are suitable for most organizations. Many enterprises are not very willing to form a reserve fund in case of unforeseen expenses, and this is their mistake.
Next, let's look at the most common mistakes in business that lead to unforeseen expenses.
Poorly organized business management.
Mistakes in leadership made at the very beginning of a project can be among the most irreparable.
Fundamentals of Marketing.
Everyone knows the basics of marketing, that demand shapes supply. The focus should be on the consumer, not on the goods and services that the enterprise offers. You can produce any product or service, but if the consumer is not interested, then there will be no profit. In addition, the location of the enterprise is very important. If the company's location is incorrect or inconvenient, there is a risk of unforeseen expenses, for example, for transport, etc.
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Dependence on suppliers and other firms.
Your business should not be 100% dependent on other businesses. If this cannot be avoided, you need to have several options and work with proven, reliable, promising partners.
Plans for future activities. Having clearly defined plans and a developed strategy, the company will be ready for the necessary expenses, and will also clearly know what it wants to receive in the end.
Organization of financial activities.
Very often, entrepreneurs are busy with current problems, and the financial part goes by the wayside. As soon as this happens, the organization faces financial problems and, of course, unexpected expenses.
The correct organization of accounting should be introduced at the enterprise from the very beginning and improved as the business develops. One of the important items of expenditure should be an item for unforeseen expenses. Many do not have enough of their own funds, take loans. And here, too, it is necessary to take into account all the risks, whether the company will be able to repay the debt with interest, in accordance with the terms of the lender, or this will lead to new unforeseen expenses.
Many entrepreneurs start spending money on an expensive car or other luxury items, which often leads to completely unnecessary unexpected expenses. It is necessary to control the expenditure of funds and keep records.
Organization of the current activities of the enterprise.
You need to have an understanding of the market in which you work. Analysis of the market, goods and services you supply, the key to success and insurance against unexpected business expenses. Keep a close eye on overheads, otherwise profits may be less than expenses. When drawing up a short-term plan, set realistic deadlines and have backup options in case of unforeseen circumstances. Additional funds may be required for overproduction, additional production or its reorganization.
One of the key moments in the well-coordinated work of the company is its employees. Personnel matters a lot. Projects and estimates may be well prepared, goods and services may be in great demand, but an unskilled labor force can ruin everything.
Marriage, theft, tardiness and absenteeism at the enterprise will certainly lead to unforeseen expenses. Well-selected, experienced, fast-learning employees can reduce or even prevent unexpected expenses.
Very often, unforeseen expenses appear due to unforeseen circumstances. These are illnesses of company owners or leading specialists, disagreements in work between business owners, an unstable economic situation, military operations, fire, and destructive natural phenomena. Changes in laws, new scientific or technological developments regarding the goods and services provided.
In market conditions, the responsibility for unforeseen expenses lies with the entrepreneur, but still part of the costs can be shifted to insurance companies. You can protect yourself from unforeseen expenses by creating insurance funds in case of fire, accidents, accidents with workers. As a rule, these cases make up the majority of contingencies.
Success and failure in any business walk side by side. No entrepreneur is immune from unexpected expenses, mistakes in doing business. The reserve fund is insurance against emerging unforeseen circumstances. The reserve fund should cover all risks and no matter how much you want to spend money from the fund, this is not worth doing. In the case of small or large unexpected expenses, the reserve fund will help to avoid the collapse of the company.
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Do you know what most often prevents people from achieving financial success?
Unforeseen expenses and inability to manage them.
Such costs are usually a consequence of the fact that they are simply didn't plan they were simply forgotten about, and when it comes time to pay, these expenses simply paralyze the family budget, and make people do stupid things that lead to big financial problems.
Such costs are always arise unexpectedly and reduce all efforts to plan family finances to zero.
Moreover, the more often this happens, the less a person has a desire to continue counting his money, and the less he begins to count them, the more unplanned expenses he has.
Therefore, it is better to learn how to manage such expenses so that, in the end, you do not give up your goals of becoming a financially wealthy person.
That is what we are going to do now.
Everything unforeseen, read: unplanned expenses can be divided into two categories .
To the firstincludes expenses incurred by you does not depend.
To the second- those whose occurrence depends only from you.
Unforeseenexpenses that depend on you, defines that lifestyle, which you lead, namely: what you own, what you like to do, how you spend your time. how do you position yourself in the eyes of others and relatives
Yes, property taxes. arise when you have real estate: an apartment, a garage, etc.
OSAGO payments, when you bought your car.
Therefore, to have or not to have these expenses is a question that depends only on you: after all, if you do not have a car, then you will not have to draw up an OSAGO policy.
When buying things for your own use, you must be prepared for mandatory payments on them.
annual payments, about which we know, but for which we could not save money. This is a vacation, medical insurance or a life insurance policy, etc.
Events that are difficult to foresee (unexpected illness)
Events that you know about, but there is no money for this event , and presence there is more a matter of habit than necessity. The decision in such cases is at the mercy of emotions: if I want, I will go, if I don’t want, I won’t go.
One of my acquaintances did this all the time when it came to celebrating the Sholokhov Days in the writer's homeland in the village of Veshenskaya, where she was born.
Each time, literally at the last moment, she “broke down” and left, although before that she constantly thought about the fact that it costs her a pretty penny and she should save money.
The cost of repairing and restoring everything that can wear out, tear and break.
stupid shopping,which are usually done under the pressure of "urgency", and you cannot soberly assess the situation, as you succumb to emotions.
Unforeseen expenses that are beyond your control include:
The difference in the price of goods which is due to inflation. And the deterioration in the quality of life is often due to it.
That is, you cannot afford to buy something at a higher price, and either reduce the volume of purchases, or switch to a different quality of goods, usually the worst.
The emergence of new payments on issues that the state has the right to regulate.
For example, consular and other fees and charges for people living in another country. In such situations, it is necessary to study the legislation and look for an opportunity to reduce certain types of fees.
As a rule, the financial result justifies the time spent on studying the necessary documents.
The growth of expenses for children due to the fact that they are growing and the costs of their maintenance, upbringing and education are also growing.
This is a natural process that you cannot influence.
What needs to be done so that all these expenses are taken into account and not forgotten, and you have the opportunity to pay them?
- Make a table of 14 columns, first the type of expense, then the total amount, and then make a breakdown by months, starting from the month in which the planning of these expenses began.
In the table, shade the month in which each expense is due. Next, calculate the number of months during which you make savings for this expense, and enter the amount calculated per month in each column.
The table will help you remember all the expenses.
Hang it in a conspicuous place, and even if you can’t immediately take into account everything, then as you remember, you will enter mandatory payments there.
The spreadsheet should always be kept handy because payment dates can change.
In this way , approach principle to contingency planning will be to transfer them to planned, in those for which money is accumulated (until you have sources of income that cover them), which means that they are taken into account in parts along with regular expenses.
- Fix the level of survival.
Analyze numbers. They will help you face reality.
By how much should your monthly expenses increase if everything you have to pay in emergency mode, you would have planned?
It will immediately be seen do you manage to provide such a lifestyle or not.
Please include here 10% of income on the financial reserve. This is your insurance in case of unforeseen circumstances.
If you can’t manage to provide such a lifestyle, then you will have to urgently review all expenses, and choose those from which you can't refuse(such as property taxes) and are required to pay, and those that will depend on the level of your income.
One thing needs to be understood: you cannot improve the quality of life if you do not have income growth.
Because having planned those expenses that you already have, you have not yet planned others that you will definitely have, but which you either do not know about or try not to think about.
What else will you have to do?
- HStart planning for inflation.
If the real price increase is 2% per month, then increase your monthly expenses by 2% of your total expenses.
- Plan for an increase in spending on children (approximately 20% per year)
- Schedule a replacement appliances and household equipment that may become obsolete. The world is changing, and cassettes have replaced vinyl records, and now no one can imagine how one can do without discs.
These are the expenses that, due to habits and necessity, you will still make.
How to go to level 2 "advanced"?
I want to reveal one secret to you.
When you summarize all this in a table and count, then you will feel bad on what you end up with.
Such a gaping hole will open, such a minus that you will become scared at the thought of how it can be mastered at all?
Because if your salary does not grow (your income), you are simply doomed to a deterioration in the quality of life with age.
And this is what older people faced, whose only way out of this situation was to give up everything new (many have not bought anything for themselves for a long time), fix the level of survival, and constantly put up with the fact that due to rising prices they can afford less and less of a quality.
This is what those who have a meager income faced and do not know how to increase it.
And the way out in this situation will be the creation and use of assets, which will generate a constant cash flow and cover the growing need for money.
BUT the only asset today, if you don't have enough money to put into circulation, the asset that will allow you to increase cash flow is your brain.
But before you start increasing your income, you definitely need to fix the level of survival, thank the Universe for what you have today, and only after that direct all your thoughts to creation.
So you can't do without planning and accounting. I hope you understand.
And there are no unexpected costs!
There are just unplanned!
Galina Ostrikova,
specialist in the field
Exaggerated and unplanned budgetary requirements may arise during the budget year. As with revenue shortfalls, the size of an unplanned need is important in determining its severity. Such an unplanned need can influence the political decisions that need to be made to deal with the problem.
Extrabudgetary spending is usually the need for funds that need to be allocated, but which were not included in the budget. Such needs include the funds necessary to eliminate the consequences of natural disasters (floods, earthquakes, etc.) or man-made disasters (the release of liquid toxic waste into groundwater, a river, a water intake system).
Unfulfilled obligations can be characterized as specific legal or, in some cases, "potential" or moral obligations of the authority to deal with an unforeseen financial crisis. This may include an unfavorable court decision, which establishes the financial obligation of the authority. The budget of any country or a particular city is faced with unexpected expenses throughout the year. Most authorities, especially small ones, already have a well-established system for dealing with such problems. A balanced legal framework is an important component of any political decision, which establishes the scope of responsibility of the authority and determines the system by which it is possible to find the necessary ways out of negative situations. In the vast majority of cases, financial risks are easy to assess; they can be dealt with while remaining within the budget process. A standard set of risk assessment and management tools can be used.
Before the crisis
First, there must be a clear legal framework in place to deal with contingencies before a crisis hits. Secondly, the risk to which the budget is exposed has to be assessed and realized at the stage of budgeting. Well-balanced budget systems provide for contingency funds to cover risks related to government guarantees and the impact of changes in debt-servicing exchange rates.
The rule of thumb is that the contingency fund should not exceed 1-3% of the total budget. A well-balanced budget makes various assumptions when analyzing the potential economic impact on the budget. The medium-term impact on the cost of servicing debt, taking into account changes in exchange rates and interest rates, should be periodically assessed. Assumptions about capital inflows and outflows have to be carefully tested to take into account possible changes in the external environment. The economic risks associated with potential liabilities should also be assessed. All of the factors listed above affect the size of the contingency fund.
Overcoming the crisis
In world practice, to solve the problem of unbudgeted expenditures and unfulfilled obligations, methods are used that differ from each other and depend on the amount of expenditure and the situation in the country. First of all, it is a budget adjustment. If the amount of expenses is small, then one of the first steps is to amend the budget. This means reducing spending elsewhere in the budget to compensate for unexpected expenses. Such a measure usually requires legal approval. Reprogramming may be applied if the amount is small and if there is appropriate authority. The crisis can be overcome by:
1. Use of a contingency fund. This may be the first solution to the problem, provided that the reserve fund exists and covers the size and nature of the costs. There may or may not be changes to the budget, but the relevant council must be kept informed of the use of the fund.
2. The use of an unforeseen appropriation comes after a request for an additional appropriation. This technique is widely used in developed countries, where the deficit and its maintenance are not the main problems. This allows funds earmarked for other programs to be used temporarily until the final cost can be used as the basis for an additional appropriation.
3. Using a "rainy day fund". Some governments establish a "rainy day fund" on a long-term basis to finance unforeseen needs. Typically, this fund is activated when revenues exceed expenditures (often as a result of windfalls, such as the share of natural resource reserves or the privatization of assets). The creation of such funds is another means of overcoming the income gap.
4. Debt. Borrowing to spread large expenses over a long period of time.
5. Increasing taxes and other income.
There is no single formula for solving the problem of overcoming the crisis. More often than not, the solution is a combination of some of the tools listed above so that the problem is solved comprehensively.
However, all developed budgeting systems budget decisions in a certain way, either expenditures depend on existing appropriations, or changes are made to the budget.
Often, repairs and interior design changes are done “for a pretty penny”, that is, money is set aside from paycheck to paycheck, and unplanned expenses can not always be easily covered. Stretch ceilings and the creation of lighting systems is a rather large investment, the approximate cost of which is easy to calculate in advance.
But what if unforeseen expenses occur already during the installation work? How to foresee everything in advance, “so that it doesn’t hurt excruciatingly” for extra expenses?
How to estimate total expenses?
To begin with, let's calculate what items the total cost estimate for the installation of stretch ceilings and lighting systems consists of. It consists of articles:
- Stretch ceiling fabric cost. Calculated as the cost of 1 sq. meters of the selected type of canvas, multiplied by the footage of the ceiling, plus a margin for fastening (the required size of the canvas will be indicated by the master measurer).
- Departure of the master measurer.
- The cost of fasteners.
- The cost of wiring and the necessary elements of lighting fixtures, as well as the lighting fixtures themselves.
- Departure of a team of installers who are directly involved in the installation work.
- The cost of the work of the brigade based on labor hours.
What items may result in unexpected expenses?
Additional expenses are caused by difficulties in work. If the work of the master proceeds under normal conditions, then any attempt to raise the price is pure fraud. In fact, unscrupulous installers do just that: they report an underestimated amount in the cost estimate, which attracts a client, and then, already in the course of work, difficulties suddenly arise, and the amount grows. That is why, when choosing a team of installers, you should not be seduced by the minimum price of services.
However, some installation difficulties will reasonably entail an increase in costs:
- Main ceiling height. If the ceiling is installed in a room with a height of 5-7 meters, then the work of the installer becomes more complicated. It is one thing to climb a stepladder 25 times in a row to a height of 3 meters, another to climb 6 meters. Extra "rises" - extra time for the master. As a result, either an increase in the cost of a labor hour, or an increase in the time of hourly work.
- Complicated ceiling configuration. Installing a rectangular ceiling is a simple matter. But if there are extra corners, pipes that need to be artistically rounded, curved sections of walls, and so on, then the work of the master becomes more complicated. Professional masters warn about this in advance.
- Installing a separator in cases where the width or length of the canvas is not enough for the room, a two-color solution is required, or the configuration of the room is not even.
- Complex lighting systems. A large number of spotlights, complex patterns and effects with LED lighting, rotary mechanisms and so on - all this increases the complexity (and cost) of the work. Indeed, under each spotlight, you need to bring out the wiring, make a slot in the ceiling, process the edges of the cut, etc. Attention also requires the choice of a lamp for stretch ceilings.
- Wall characteristics. By itself, the consistency of the wall may not be suitable for tensioning the fabric of a stretch ceiling: it may be loose, with voids inside, pieces of slag, insulation, etc. In such cases, additional work is needed to strengthen the walls or the profile itself (“struts”, etc.), which, of course, will entail additional costs.
- The clutter of the room. Extra money is rarely taken for this, but just in case, you should make sure that the master is more or less comfortable working. If the room is full of furniture to reach through, debris and “necessary items” on the floor, then the master has to spend extra time on normal actions, and it’s just inconvenient to act. How to prepare a room for renovation- read.
- Remoteness of the object. The departure of measurers and craftsmen is also included in the cost of installing ceilings: work around the city is cheaper than out-of-town work, and if you have to go to Tmutarakan, then the road itself will take more time than installing the ceiling.