Budgets in the Planning Phase

00:02 Welcome to another important stage of the planning process.

00:06 A word that brings fear to any university students' ears.

00:11 Budgeting. As you can imagine, planning the costs for a project is not a simple job.

00:18 There are plenty of questions a project manager needs to ask and get answers to. What financial resources do they need to create the deliverables? Are they going to be additional expenses? Will they need monetary buffers for any tasks? When do they need the money? Where will it come from? What is the total budget? Who will control the costs? How? Plus more, obviously.

00:45 What was the best way to answer these questions? You got it. A detailed project budget.

00:53 Conveniently building one of these follows a similar process to building a project schedule.

00:59 First, identify the activities that cost money from your work breakdown structure or activity list.

01:07 Then estimate the cost of each work package task and deliverable add buffers and account for uncertainties.

01:16 At that point, you should be ready to time the expenses.

01:19 This can be done using a Gantt-Chart.

01:23 And finally put it all together into a project budget.

01:28 But before we dive into the process of building said budget, there's something to note. Budgets are often exceeded because just like Jimmy's timekeeping spending habits fall prey to the optimism bias.

01:42 So yet again, the project manager has to go beyond her or his natural instincts and plan a budget with sufficient breadth and depth.

01:50 They must account for every part of the project that could potentially cost money and estimate how much money as accurately as humanly possible.

01:59 Next lesson, we'll go through this process and see how to avoid any pitfalls.

02:05 See you there, project manager.