Budgeting Insights

 

 

Budgeting is a valuable instrument to help you prepare in advance for the storms. Having a financial plan is absolutely essential in enabling you to manage your money, whether in “smooth flying” or in rough times. A financial plan will be a great help to you in making realistic decisions. Decisions must be made within some kind of framework or design. That framework or design provides guideposts that mark the limitations or boundaries within which the individual or family must operate.

 

 Sometimes people become discouraged with budgeting because an emergency arises and there is no money. The roof leaks, the front tire blows out, or some other minor or major disaster wrecks the family budget. A budget helps you cope with unexpected expenses. The more modest the income, the more important a budget is. People with a lower income have less flexibility in their spending patterns; this actually increases the importance of developing a good budget.

 

Emergencies can’t be determined in advance, but provision can be made for them in the budget. No one can say for sure just how much money should be kept in this emergency fund, but many financial experts recommend three to six months’ income.

 

How can one provide for such emergencies? What if, during a recessionary economy, sales are slow at the plant or office and the company is forced to arrange for layoffs in order to keep its budget on course for the year? Provision for emergencies such as a temporary work layoff should be made in advance by finding some extra money each week to put away for unexpected expenses. There are really only two ways to do that. You must either raise your level of income or reduce your current expenses.

 

If you are now in a financial trial and find yourself without a budget, don’t become overwhelmed! True, it’s hard to create a budget when the bills are greater than your income. Like the friend I mentioned earlier, you may find yourself without a job, not knowing where the money is going to come from. Even in times of inconsistent income, however, budgeting is a tool to help you determine where your money is going. Resolve in your heart to budget, whether income is predictable or not.

 

 

Your thoughts on this subject?  Your comments appreciated!

 

Content © Rich Brott, 2011

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