Abu Dhabi: The General Pension and Social Security Authority (GPSSA) announced the launch of the third course of the proactive financial planning system “Wafra” on the platform of Government talents Future “Jahiz”. The course, entitled “Financial Management” provides a vision on how to plan personal budget. It focuses on the way of collecting required information from different sources to prepare a budget, understanding and developing the process of preparing a personal budget, how to benefit from the personal financial management applications, understanding the key considerations about banks and review of key steps to build a healthy relation with banks.

Budget and family relationships
Budget is one of the key factors affecting the family relationships, lifestyle and future. Whoever can manage his funds will have better relationships with his partner, friends and family. It is important to transfer this knowledge to children so that they do not face same challenges. A person must know how much he earns compared to his monthly commitments. This is what the budget planning process explains as it does not only provide planning, but it helps control ambitions and lifestyle also. Impact on the future is related to the good financial management which is part of planning for the future.

Budget plan
It is a financial plan showing the income and expenses of the person for a certain time period; i.e. one month or one year and provides information that enable people controlling their financial affairs and making proper decisions on what they can spend, repay or save? What are their financial objectives and priorities? What they should do if they spend more than their income? Budget consists of income and expenses during a set period and the difference between them is the balance.

Income and expenses
Income is all the funds earned from all sources. It can be classified into two categories of direct income and indirect income. Direct income is the income gained by the person from work whether in a job or business, while indirect income is an income from a source different from work like income from rent, general pensions or return on savings, etc.

While expenses mean the amount of monies spent. These do not include the monies used for the settlement of payments, repayment of loans / saving. Expenses may be divided into two categories: essential expenses including insurance, work permit, food and beverages, bills, etc., and the second category is the estimated expenses which cover optional expenses on the products and services desired by the persons and saving for purchase of items aspire to have in the future.

Financial position table
It is noted that there is a difference between income and expenses that may lead to financial deficit which means negative balance. In this case, the budget must be revised to identify where the reduction of expenses may be applied and the income may be increased in the near future at least to reach a zero balance which means the budget balance. However, we should ensure to save an amount periodically. The increase of such amount means there is surplus. Such surplus refers to a positive balance in the current financial situation. However, even if there is a surplus, we should think about revision of the budget as the person may need to repay more installments of debt or save more money.

Advices on preparing budget
It is important to put the income on top and deduct the expenses based on priority like basic expenses and estimated expenses with the balance below. Once essential expenses are identified and estimated expenses are reduced, we will notice a positive balance. Here we should monitor the incomes and expenses to enable financial saving. Therefore, it is rather important to understand the cash flow forecast. This forecast is used to predict the incomes and expenses over time periods and contributes to the identification of suitable options to finance the deficit at short term and there may be a surplus. In addition, it may be used to save or pay higher payments of debts if necessary.

Overspending
Overspending is a common problem which exists due to easy and available credit. Individuals tend to spend more than their ability which is a common problem when credit is available leading to accumulation of debts and affecting the future financial plans. Availability of cash in the account does not necessarily mean a budget balance. Therefore, we should focus on what we can afford rather than focusing on “the cheapest way”. Financial ability should draw the lifestyle not the contrary. The cheapest way is not always money-saving. Therefore, money should always be spent within available resources.

Six steps for budget planning
The first step is the financial information including the calculation of monthly income from work salary, saving / investment accounts then creating a list of monthly expenses using the previous account statement. Then, fixed and variable expenses are calculated and the monthly income and monthly expenses are summed up. If the income is higher than expenses, additional funds may be used for saving for retirement or for repayment of debts. If expenses are higher than income, the is an overspending and certain changes or modification to expenses are required or variable expenses may be given up and other sources of expenses may be reduced.

Financial affairs management applications
Using the personal financial affairs management applications like “Ghaya”, the budget may be managed by entering the budget information. The budget management applications provide important and useful advantages including the creation of comprehensive and integrated money management system, issue of notifications in case of overspending, development of a plan helping repayment of any due debts, monitoring the expenses accurately, providing a clear control panel for direct and real-time access to financial elements and focusing on the remaining amount each month.
 
For more information, please contact:
Mr. Adel Ramzy
Media and Public Relations Officer
Tel: +971 2 2030 022
Fax: +971 2 4418 587
E-mail: adel.ramzy@gpssa.gov.ae
Website: www.gpssa.gov.ae