A budget is a reality check on the projected cost of a period of time. This is created to see if you can afford what you want to spend money on for the month. Budgets are considered by many people as a necessary component to succeed in business and be able to finance properly. A budget can be created for any amount of money. Although, the larger the numbers that are being dealt with the more necessary the budget becomes. Budgets will aid in keeping a person out of debt as well as help set up the future by saving, investing and being smart with the funds that you have right now.
One of the challenging parts of budgeting is, when putting together a personal budget there needs to be an honesty of what the money is actually being spent on. Part of this difficulty is figuring out what you spend on and to make the list based on that can be very tedious. This can be especially tedious if you are someone as I am who uses cash and credit cards and therefore can be hard to track all the spending.
Although for me this was reasonably easy the challenging part was getting the categories together and figuring out the amount that should be allotted for each one. One of the easy parts of creating this budget was the fact that my numbers are quite simple but multiplied for the purpose of making a real scenario. I believe that once I am supporting myself and paying all my own bills my budget sheet will be more complicated to make.
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As a student being primarily supported by my parents, the reality check of how much money is spent before dealing with insurance and other health costs that would apply once I support myself. Currently as a student over half my spending goes towards transportation and tuition. I realized that although my costs are very minimal now costs can accumulate very quickly. I learned that for me although I don’t consider myself high maintenance, I will need a decent job and career that will support a family and the extras that I want to spend money on.
With this being said, if a person isn’t careful, it is quite simple for debt to accumulate in a short time. In an article, they reported that roughly 80% of Americans are in some form of debt. A personal budget I believe would assist anyone to keep track of their finances to help avoid debt and give a true realization as to what money can or can’t be spent on. The other way that I believe a budget would work for me is that with a budget its trial and error. If one is creating a monthly budget then if they fail or overspend one month, they always have next month to fix it. The help of a budget is that you can tell where you overspent and where you need to cut down spending.
There are many advantages as well as disadvantages of having to abide by a strict budget. In a business setting, the cons will differ then a personal budget. The pros of using a budget are that you know where the money is going and how much is being spent on everything. Once you know how much needs to be spent you can figure out what to put away in savings for the future. A business as well can see what the money is going to like which departments or the business of other expenses. A business budget will be created then each group within the business will be told how much they can spend. The overall pro is the person knows how much can be spent now and how much can be put away and help avoid gaining debt.
While there are pros, the cons are very strong. The time required will vary based on the amount of money that is being dealt with but for any amount creating a budget, will be time-consuming. A budget sheet accounts for the projected costs or the anticipated costs whereas unexpected bills can mess up the entire budget sheet. Another issue is one might overcompensate one group then not have enough money to spend on something else. Business budgets might cause a more negative effect on a company. The chance of a market shift in which money would need to be used for other projects instead of this one and the entire sheet will need to be redone is not completely foreign. As well as this a certain part of the company might spend more at the end of the year in order to show that they require the money for the future and won’t lose the funding.
At the end of the day while a budget might be more complex than just living life with the money in your pocket until it runs out it is worth it. A budget will help determine negative spending habits and hopefully catch it early enough prevent going into debt. Once a person can assume that if they stick to their budget, they will, hopefully, be budget free they can set their life’s goals. While this is not foolproof it is a very good and recommended starting point.
