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Discuss personal capital budgetting decisions and explain your thinking in budgeting.

Discuss personal capital budgetting decisions and explain your thinking in budgeting.

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Answer #1

Personal capital budgeting is breaking down and analyzing your income (cash inflows) and expenses (cash outflows) so that you are able to achieve your long term targets in a phased and controlled manner.

Breaking income means to sub divide the income from various sources.

Similarly breaking expenses means sub dividing your expenses into various categories.

Breaking long term targets into small targets is a very helpful technique to achieve your long term targets as this allows you to keep a track on the achievement of small term targets. If the short term targets are not getting achieved, one has to either increase his/her income or to control expenses that are avoidable or can be deferred at later stage.

This is a very helpful tool to plan retirement in terms of corpus needed post retirement and similarly that corpus can be broken into shorter periods and analyzing income and expenses helps in achieving first short term targets and then long term targets.

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