Budget, Budget Who’s Got the Budget?

When most people hear the word budget, what do they think? What do you think? Does control come to mind? Do you think that now I can’t do what I want? A budget is a measure of control but it doesn’t work against you, it works for you.

A budget is defined as a list of all planned expenses and revenues. It is a plan for saving and spending. In other terms, a budget is an organizational plan stated in monetary terms, an estimate of how money will be spent.

The Purpose of Budgeting

Provide a forecast of revenues and expenditures, that is, construct a model of how our finances might perform if certain strategies, events and plans are carried out.
Enables your actual financial operation to be measured against the plan or forecast.

If the actual figures delivered through the budget period come close to the budget, this suggests that we understand the business and have been successfully driving it in the intended direction. On the other hand, if the figures diverge from the budget, this could mean that we are out of control.

There are many different types of budgets. There are budgets for start up business and budgets for corporations. There are department budgets and city, county, and state budgets. There are even personal and family budgets as well as vacation budgets and monthly budgets. There are sales budgets and cash flow budgets. There are even marketing and production budgets.

So many budgets…

Seems like if all of these budgets exist and all different types of organizations and groups use budgets, there must be something about budgets that work.

A budget is a plan for spending money that is tied to an overall goal for the group or organization. In an organizational context or business sense, all expenses are tied to the budget. For example, in the retail business, you have a sales budget or what some call a sales estimate. This could be daily, weekly, or monthly. In this environment it is imperative that you meet the sales budget or estimate! This is because everything, all expenses, are tied to the sales budget. Salary cost and overhead, shipping and even markdowns are all tied to sales budget. If the sales budget was not meant, then to have a positive cash flow, to stay in the green, to keep the budget at a break even; something in the budget had to be cut – spending had to be cut. More often than not it was salary cost, but something had to be cut.

My point is that if organizations and groups use budgets in this way, why can’t you. Why can’t you estimate your spending with a budget and then if you do not meet the budget cut some spending. That company that you bought your car from and the company that you bought your cell phone from do it that way. That is they manage the finances with a budget estimate and then if they do not meet the estimate they start cutting. If you meet the estimate, if you spend according to plan you are good- there is no cutting necessary.

Try it…a budget may benefit you and take you to a place of financial security you never imagined.