Why Budget?

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Why Budget?


By Karen McMurray

The word budget comes from the French word, “bougette” which means “purse”.  I find that very interesting since we use that word as a place to keep money.  A well-planned budget should help you keep more of your money or use it in a wiser manner.    Any individual or any entity with ANY money should have a budget.  Individuals with budgets are able to stretch their funds farther and make wiser spending choices, enabling them to give and save more.  It is a financial plan that enables you to list all planned expenses and revenues.  It should provide a plan for saving, giving, borrowing and spending.   A well-planned budget is like a good road map, it helps you get where you want to go in the best possible manner.   Like using a road map, the most important place to start is with your destination in mind.  You have to know what your goals are and where you plan to go as you begin to plan how to get there.

Budgeting is especially important in governments and not-for-profits since there are generally no direct revenue and expense relationships.  The supply and demand model that is used in for-profit businesses is not applicable.  We don’t give to our favorite charities because of what they give us and we don’t pay our taxes based on the level of government benefits we receive.  Governments and not-for-profits also do not generally have any excess capital to depend on, they usually have limits on the amount of borrowing available and have specific requirements for appropriation of their expenses.

For all individuals and entities, budgeting is needed to control limited resources, provide a means to achieve goals, evaluate performance and communicate plans to any other affected individuals or entities.  Also for all individuals and entities, a separate budget may be needed for special projects or capital expenditures that require additional saving or borrowing to achieve.   Like driving around without a map or solid destination will almost guarantee that you will drive more miles to get somewhere than if you have a good idea of where you are going and how to get there,  operating without a budget will almost guarantee that you spend too much and can’t account for all that you have spent.

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