We often hear the term “budget” in our day-to-day living. What exactly is it and what is its importance in our lives? Budget is the systematic allocation of one’s resources or income to the various requirements, which are nothing but expenses. Though a tedious and high-maintenance task, budget can help control one’s income. Budgeting can have different connotations for different people. While for some it is a process of keeping a track of each source where money is being spent, for others it might mean keeping the monthly savings aside and then utilizing the leftover amount for everyday expenses. Budgeting is a prerequisite if one wants to achieve long-term financial goals.
Be it the wholesome nation or a small nuclear family, budgeting is necessary to make money matters simple and hence, life easy to handle. Budgeting can be done on a weekly, monthly or yearly basis. A weekly budget portrays the transactions that took place in the entire week. Likewise, monthly and yearly budgets showcase the transactions undertaken in a month or the entire year respectively. Hence, by regulating the expenses, a budget can contribute towards enhancing profits of the organization, business or an individual. Given here are the primary things that one should keep in mind in order to stay within a specific budget.
Significance Of Budget
In case of an annual budget of a nation, budgeting is all about making a blueprint of the overall funds that the concerned government will spend on various sectors, the kinds of taxes that would be levied and how the prices of essential commodities would increase or decrease in the months ahead. Like any other budget, a government budget too relies on revenues and expenses. While the revenues are generated from the various taxes imposed, expenses usually include the expenditure amount on goods and services, consumption, investments, retirement benefits, and so on. In the absence of a good budget, the government officials will have to struggle hard in developing processes for the same.
The safety and security is the foremost concern for a family. Hence, planning a personal family budget is highly significant. Budgeting in a family is simply done by streamlining the expenses of every family member in accordance to the overall funds collected by the earning members of the family. While some people believe the budget to be a complicated matter of numbers and accounting practices, others assume planning the budget to prevent them from unforeseen problems, downfalls and financial losses. The major issue that comes forward with planning a family budget is that it limits the control of a person over his/her money. However, the fact is that budget does not restrict anyone. It, instead, only guides people towards the allocation of money in different sectors, such as food, shelter, clothing, household expenses, medical care, utilities, etc. on a monthly basis.
For Business Organizations
Business organizations have a strong reason for planning a budget. It helps them in planning targets for the future, in terms of laying figures that the organization plans to achieve. It is of no use to plan a budget with a host of high figures that is practically unachievable. Similarly, a budget that is too easy to achieve is also pointless as the business would then not be making enough progress that it should. Hence, a good budget is one that is achievable in reality with the motive of striving for the highest profits. While most budgets are planned annually, some can be set for a prolonged period as well. To put the budget into action, it should be prepared well in advance before the commencement of the financial year.