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In this video, the tutorial explains how to create a research proposal budget using Microsoft Word. It emphasizes the simplicity of Word over Excel for this task. The first step is to create a heading, followed by stating the source of funding, which could be through a faculty fund or personal financing. After that, a budget table should be structured with columns for items, explanations, and costs. The explanation column is important for clarifying what each budget item pertains to, ensuring that readers understand the context, particularly regarding research assistants' roles mentioned in the methods section. This clarity helps prevent confusion about budget allocations.