Why budget? What’s the advantage?
There has never been a more appropriate time to ask yourself “Why budget?” than now. What with the global credit crisis we find ourselves in, the need to be on top of our own financial situation has never been greater.
Whether you are purely interested in your own personal finances, or whether you are responsible for managing someone else’s finances, the need to budget has never been more apparent. For those of you who are unfamiliar with budgeting, it is worth spending a little time on explaining the value of creating a budget plan.
A budget is a method of gathering all of your items of expenditure in one place so that you can review the overall situation to establish how much money are going to be needing in the future. The period of time you are budgeting for can be anything from 1 week to several months or even, years. You set your own time period depending on what you are trying to achieve.
The most important thing in creating a budget is to be sure to include all expenditure, and even where you are unsure of what you may need and how much it may cost, you must still make an allowance. It is better to “go over the top” than to underestimate. If you overestimate you will be in for a pleasant surprise, whereas if you underestimate you may be in for a nasty shock when you realize you haven’t got enough money to cover all expenditure.
The ability to create a reasonably accurate budget forewarns us how much money we need to be earning to cover our forecast expenditure. This is now a very important “tool” particularly in the current global financial crisis. Your budget will forewarn you of any impending problems that are likely to arise whereby you may have insufficient funds either in earnings or savings, or a combination of both, to be able to meet your particular financial demands.
The most important thing of all is that a properly drawn up budget lets you see clearly what your financial situation is, and what it’s going to be in the future, and it gives you the time to study and plan ways to maneuver your situation accordingly.
