How is the budget prepared

How is the budget prepared

We all know that every year, the Government of India as well as State Governments presents their budgets in the parliament and state assemblies. It is generally done in Feb / March and is related to the next financial year starting April 1. Here is an excerpt on how the central govt’s budget is prepared.

The Budget is the annual financial report presented by the Finance Minister. It is the detailed statement of accounts, estimated receipts and expenditure for the next financial year. The funds raised to meet government expenses are subject to the approval of Parliament. The Finance Minister seeks Parliament’s approval to collect funds for expenditure via taxes, duties and borrowings.

The Budget is formulated after a detailed consultative process. All ministries and departments, states, union territories, autonomous bodies and the defence forces present their expenditure and earning estimates to the Ministry of Finance. The Finance Ministry along with the Planning Commission also seeks the views of various stakeholders like farmers, business bodies, foreign institutional investors and economists.

After this exhaustive consultative process, the Finance Minister takes a final call on the tax proposals and seeks Prime Minister’s approval. After a final nod, the Budget Division of the Department of Economic Affairs prepares the final document.

The Union Budget is presented on the last working day of February. The government has to seek the President’s approval for presentation. A Budget Summary presented to the Union cabinet before the document is put before both Houses of Parliament.

The Budget document is divided into two parts. The first part (Part A) is the general economic survey and policy statements while the second part (Part B) deals with indirect and direct tax proposals.

The Parliament undertakes general and detailed discussions on the Budget proposals. The general discussion usually lasts 2-4 days in the Lok Sabha. The government seeks a 'vote-on-account' in Parliament for expenditure for initial months of financial year.

Simultaneously, relevant standing committees consider demands for grants from the Parliament. All the outstanding demands for grants are put to vote by the Speaker on the last date for discussion in the House. The Appropriation Bill is then put to vote in the Lok Sabha followed by discussion and voting on the Finance Bill and Money Bill. After Parliament approval, the Bill is sent to the President for clearance.

The budget papers are printed in a press located within the Finance Ministry. Officials who are part of the Budget process are kept in isolation and have to sleep at the North Block. They are only allowed to leave once the Finance Minister in the Lok Sabha has tabled the Budget.

The first budget of independent India was presented by Sir R K Shanmukham Chetty on 26/11/1947. That budget had revenue of Rs171.15 crores and expenditure of Rs197.39 crores. The budget had a deficit of Rs26.24 crores.

Since then, we have come a long way. The size of the budget for 2013-14 is Rs16,65,000 crores. This is the 82^nd budget, of which 66 are normal annual budgets, 12 are interim budgets and 4 are special occasion budgets known as mini budgets.

Mr Chidambaram so far presented 8 budgets, the second highest by any finance minister. Morarji Desai had presented the union budget for maximum times of 10 times. He is the only financial minister to present a budget on his birth day 29^th Feb.

Achieving Goals

Goal is "a dream with a plan and a deadline. We all know that goal setting is very important. Achieving the goals is as important as goal setting itself.

The most common reasons people don't reach their goals are they fail to write them down, fail to make a plan and fail to take action. To reach the desired goals, it is important to know, where we want to go and how we are going. Here are some steps that will help to achieve all your goals and dreams.

1. Create SMART goals

Make sure your goals are Specific, Measurable in quantity, Achievable, Realistic but also a stretch and Time bound. Our goals have to be SMART.

2. Write all the barriers you can think might get in the way of you achieving your goals. Writing down all the thoughts on paper, helps to find ways to overcome the barriers.

3. Select top 3 goals you want to reach in the next 3 months from your list. Commit yourself and take action step every day to achieve these goals.

4. Write specific action steps for each goal. An action step doesn't have to take very long to do. It could be spending 10-15 minutes daily working towards that goal. If your goal is to sign on 10 new clients in the next 3 months, an action step could be making 20 new prospect calls each day.

5. Make a list of people who can support you in reaching your goals. They may also have goals that you can support them in reaching. People like to help, so ask them.

6. Put your goals in a visible place so you can see them daily. Post them on your desk, on your bathroom mirror etc so that you are reminded of the goals now and then.

7. Every day read your goals aloud. Speak your goals in the present tense, as if you're already there. The more you say your goals aloud and to yourself, the more real they become.

8. Visualize yourself having reached your goals. See yourself succeeding. How excited you'll be when you bring in those new clients and get that incentive payout.

9. Promise yourself that you will achieve your goals. To make this to be the year of sales breakthroughs, then it's up to us to commit ourselves emotionally, mentally and physically.

We are sure that a serious attempt to practice these principles would surely take us to the goal post.

Financial Tips for Young Adults

Personal finance is not being taught in high school or college. Most of the youngsters are clueless on how to manage the money when they are out in the real world. Understanding personal finance is not a big thing. All it needs is the willingness for a little reading. Here are few things to understand about money.

1.      Self Control

If you're lucky, your parents might have taught you little about self control. If not, better learn it soon. When you want to buy some thing, first evaluate the real need for it; then save enough money to buy it than to buy on credit card. Don’t ever carry over your card bills; the rate charged by credit card providers is very high.

2.      Take Control of Your Own Financial Future

If you don't learn to manage your own money, other people will find ways to (mis) manage it for you. Read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard. Understanding how money works is the first step toward making your money work for you.

3.      Know Where Your Money Goes

Once you understand the basics of personal finance, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Try to keep your recurring monthly expenses as low as possible.

4.      Start an Emergency Fund

One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe towards loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount in your budget to save in an emergency fund every month. If you get into the habit of saving money and treating it as a non-negotiable monthly "expense", soon you'll have good accumulation. You'll have retirement money, vacation money and even money for a home loan down payment.

5.      Get a Grip on Taxes

It's important to understand how income taxes work. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial obligations. There are ways to optimize your tax outflow through appropriate investments.

6.      Guard Your Health

Health insurance is available for a small premium. With small premium payouts, you will be able to cover yourself against unexpected medical expenses. If you're uninsured, don't wait another day to apply for health insurance. Better to follow good food habits; Avoid smoking and drinking. Also, practice some regular exercise to keep yourself healthy;

7.      Guard Your Wealth

To ensure protection of your hard-earned money, you should take some steps to protect it. To protect the contents of your home from burglary or fire, insure them for appropriate value.

These are only indicative and not exhaustive. People can make a beginning and move onto new ideas later. If followed, we are sure these would imbibe the discipline one needs to achieve the financial freedom in a planned way.

Simple Ways to Build Wealth

                                              

As a sequel to the earlier article “Achieving Financial Freedom” in the Nov 2012 issue, we bring in another article to explain the simple ways of building wealth.

Building wealth is simple. In fact, it is so simple and can be explained in three simple statements.

1. Spend less.
2. Earn more.       
3. Invest wisely.

These are timeless wisdom and have been proved over the centuries.

We must create a gap between how much we earn and how much we spend. The twin themes of spending less and making more are not mutually exclusive but they require different mindsets.

Thrift is about living on less and requires self discipline. For some people there is a feeling of sacrifice. For others, thrift is a pleasurable journey in simplification where fulfillment results from redirecting earned income toward financial goals.

Another alternative is to raise the income side of the equation. The advantage to this approach is there is no theoretical limitation to how fast our wealth can grow because our earning capacity is unlimited.

Many wealth gurus teach the income side of the equation as the “fast path” to wealth; however, if we don’t master the spending side of the equation, we run a high risk of failure due to the common mistake of allowing spending to rise as fast as income.

The greatest wealth builders focus on both sides of the equation together. They maximize savings by controlling spending while growing income at the same time. It is the quickest path to increased savings for investment.

Your Wealth is determined By Your Habits

The reason why few people achieve wealth is because only few practice the habits that lead to wealth. As we already know, the formula is simple. The only thing is to take action with enough consistency to achieve the goal.

Here’s the formula for how this works:

Wealth = [(Small, Smart Choices) * (Consistency) * (Time)]

Procrastination is the single biggest wealth killer. Action is where the rubber meets the road. It is one thing to know what to do and it is something else to get it done. That is why habits are so important.

The distinguishing characteristic of people who achieve wealth is they manage their money well. They have good money habits. They don’t earn the most. They aren’t the smartest. They don’t have any special training. They just have good money habits.

A daily habit of thrift saves small amounts every day that compound and grow over long periods of time to become substantial wealth. A daily habit of increasing your earning capacity through training and education will add small amounts every day to your income potential.

We don’t have to intellectualize the process or overcome massive obstacles. We don’t have to get ready to get ready. Instead, we just start today by adopting one habit that serves your wealth goals. Here are some potential starting points.

1. Sign up for an automatic savings program.
2. Prepay a small amount on your mortgage loan.
3. Find an unnecessary expense and eliminate it.
4. Repair something instead of replacing it.
5. Develop a niche expertise in your profession that commands a higher wage.

Just pick one habit and start today. Practice the habit until it becomes permanent, then pick another habit and do it again. Then another and another until you can see your wealth grow.

To recap,

The formula for wealth creation is simple

–        Spend less than we make and invest the difference wisely.

–        The mechanism to take action on the formula and produce results is equally simple – adopt wealth building habits.

–        Here’s how it looks like.

Wealth = [(Small, Smart Choices) * (Consistency) * (Time)]

Value System

We face tough situations everyday. We encounter several circumstances each day which test our patience, character and peace of mind. Ultimately, our values guide us and shape our priorities and reactions.

When our actions and words are aligned with our values, life is generally good and we feel content, confident and satisfied. But when our behaviors don’t match-up with our values, we soon begin to sense an uneasiness that begins to swell and grow inside of us.

This uncomfortable feeling tells us that not all is good right now. We feel out of touch and out-of-sorts. These feelings can be a source of anxiety and unhappiness.

Making a deliberate and conscious attempt to identity which values are the most important is needed to keep your anxiety low and your happiness and sense of personal worth and self awareness high.

Our lives can become less stressful and more productive, when we acknowledge our personal values and attempt to honor these values regardless of the circumstances we encounter.

The following are some of the values which we can inculcate and practice.

1.       Appreciation Take a brief moment to say thanks or acknowledge the exceptional job done by your sub-ordinate in completing an assignment. This will not only encourage him but also fill your soul with more appreciation too.

2.       Belief in Others. It can be your attitude; your resolve, that can lift someone up when they are down. Their doubt can be erased by your confidence. Belief is contagious – the more you believe in others; the more you will continue to believe in yourself.

3.       Cooperation. Even the most complex tasks and assignments can be made simpler when we focus on the solutions, together as a team.

4.       Devotion. Some days are better than others. It’s the same way in our interpersonal relationships. Things can get unstable at times, but staying devoted to a cause or to a person through the uncertain times is our rock to grasp when our faith and our foundation is shaky.

5.       Effort. No matter the outcome, there is always value in the effort when the effort is authentic and well intended.

6.       Forgiveness. To be clear, the purpose of forgiveness is not to absolve someone of the wrongs committed against you; but to free yourself from the pain and the anger that is keeping you stuck. When you forgive, you are better able to let go of the past and keep moving forward with your life.

7.       Gratitude. A grateful heart helps to see so much abundance in life.

8.       Honesty. A honest life, keeps our hearts and souls pure and our minds free of doubt. When we are honest, we know we are doing the right things.

9.       Listening. As a parent, one of the best gifts you can give your children is to listen; to really listen to what they are saying and to be fully present in the moment with them.

10.   Patience. Patience is a value which can also improve productivity because it creates a better state of mind for better decision making.

11.   Respect. We are all different, yet we are all the same in the sense we all want to be respected. When we respect others we are not only validating the other person’s dignity, we are also enhancing our own.

12.   Sacrifice. Sometimes it’s appropriate to put someone else’s needs before your own. This is the meaning of sacrifice. Along with sacrifice comes some discomfort; perhaps even some pain. This is what makes sacrifice a value.

13.   Tolerance. There are people who make us angry and we just can’t seem to see eye-to-eye on an issue. Rather than showing contempt, tolerance is a better alternative. It shows respects, patience and courtesy all important values in their own right.

14.   Unity. There is indeed strength in numbers. Working together to solve a common problem ensures a greater chance of success.

15.   Vision. Vision is created by our dreams. Vision provides the avenue to take our lives to wherever we want them to go. Our vision reminds us that we are always capable of learning and growing.

Let us practice some of these values to better ourselves and bring out the best from us.