Budgeting

Many fear the word budget as though it is some terrible monster lurking in the shadows waiting to pounce every time the paycheck comes in. But this fear is unwarranted, since if anything, a budget can be a valuable asset to the family. The fear that most envision when considering a budget is that the budget will control them. People do not like to be controlled. Though for awhile it may seem that the budget does wield too much control, with a little patience and foresight the adherent will realize that what the budget actually does is give back control of a persons financial future.

A good and brief definition of a budget has been cited as “a specific plan for spending your income.” Now if you plan a trip, who do you think is in control of where you go—you are right? It only follows that if a budget is a plan and you do the planning then you are in control of it and not it in control of you.

The truth is that without a budget you are not in control of your spending habits and unless you’re really different than most people you will not be able to give a detailed account of where all the money went last month. Living life without a budget is a lot like being set adrift on a boat without a sail—somehow you seem to get from one spot to the next but it seems after awhile as though you are just getting nowhere. So many people enter their retirement years with little or no money to survive. A budget is a friend and not some shadowy monster. A budget is simply a tool or mechanism that puts you in control of spending now and your financial future later.

There are many things to consider when preparing a budget. You will need to decide (with your family) what will be your short, intermediate, and long term goals. But even before that there are two crucial steps you will need to take:

• The net worth statement. This will determine where you are now and include what you own (itemized list of assets) and who you owe (itemized list of liabilities). Your assets minus your liabilities will tell you your net worth.
• The cash flow statement. This report must be at least for a month but may be as long as an entire year. Cash receipts and payment records for a specified time allows a person to quickly and easily see where most of their money is going. To get a complete picture of cash flow it is necessary to carry a pocket notebook with you while you methodically record every dime spent everywhere you go throughout the month. This may be a tedious task but take courage—you only need to do it once and the results can often be eye-opening. This also gives you a footing from which you can plan a budget that works for you.

Kapoor. Personal Finance. Fourth Ed. p 60.

Save Your Hard Earned Money

Budgeting Program

Home

Your Location:
Home >
Articles