What Is the Budget Preparation Process?

The budget preparation process is the process clients should be advised to follow when they begin creating their budgets. Mortgage brokers and lending specialists should be aware of the various steps to follow throughout the budget preparation process, including the following:

1. Assess income
2. Outline expenses
3. Set financial goals
4. Create a plan
5. Monitor and track financial progress

To begin creating a budget, clients will first need to assess the various streams of income they receive monthly. Income streams include government benefits, investment income, employment income, student loans, retirement income and much more. 

Outlining monthly expenses is an essential part of the budget preparation process. It may be helpful to assess income and then record the various expenses over the course of a few months. Monthly expenses include the four types of expenses which are fixed expenses, recurring expenses, non-recurring expenses, and whammy expenses. 

Creating financial goals is a great way to use a budget to its full potential. Financial goals can be both long and short-term, including preparing for retirement, saving to purchase a new home, saving to remodel a current home, and much more. 

When a client has identified their individual financial goals, it is now time to create a plan and begin working to achieve the goals. The plan should match the client’s financial status and monthly income. It is extremely important to remember not to create a plan that functions outside of an individual’s financial means. 

Once the steps we have discussed above have been completed, a client should now prepare themselves to consistently monitor and track their financial progress. This can be easily accomplished through a financial diary or a simple notebook. Ensure all income and expenses are recorded and savings accounts funds are being monitored.