Budgeting and Money Management

The Importance of Budgeting

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For many people, the idea of budgeting their money is about as appealing as dieting. But diets often tell you exactly what to eat, whereas budgets do not tell you exactly how to spend your money.

A budget is a plan that is used by both individuals and businesses. A personal budget is used to help you live as well as possible with the money that you have. In the business world, budgets help managers plan as well as possible for their companies and employees.

One of the largest budgets you hear about is that of the United States. It is called the federal budget, and it is designed to keep track of how the government spends its money and collects its income (taxes and other revenues).

Currently, the federal budget is unbalanced. This occurs in a budget when too much money is spent or not enough money is received. The result of an unbalanced budget is that there is not enough money to pay all of the bills. In order to balance the federal budget, members of the Congress pass measures regulating how funds are spent.

It is obvious that a government needs to have a budget and keep track of how its money is spent and received. But what if you don’t work and have only a small allowance from your parents? Even if you don’t have a lot of money to keep track of, there are still good reasons to learn budgeting skills. A budget can help you in several ways.

Knowing Where and How You Spend Your Money

A recent study showed that American teens spent more than $169 billion in 2004. It also showed that teens spend most of their money on clothing (33 percent) and food (21 percent). Entertainment items such as movies, CDs, and games are other popular products that teens spend their money on. While it can be fun to spend money on entertainment and recreation, it is also important to budget money as well. Using a budget to keep track of money may decrease the worries of many people. That is because budgeting can help you have a feeling of control over your money.

Setting Aside Money for Bills

Comparing families in industrialized countries, Americans have one of the lowest rates of savings per household. A budget can’t make a person save money, but it can help. Also, a budget will increase the chances that money is spent in a wise fashion.

Perhaps you currently receive an allowance from your parents or hold a part-time job after school. By budgeting the money that you receive each week, it may be possible for you to buy what you need, such as lunches, bus fare, and clothing, and still save for things you want, such as video games or designer clothing. Aside from setting money aside for your wants, budgeting helps ensure that you will have money set aside for necessities like food, rent, and bills.

Preparing for Unforeseen Expenses

Suppose you borrow a friend’s in-line skates for the weekend. While skating, one of the wheels catches on a rock and pulls loose from the boot. Your friend agrees to wait while you have the wheel replaced, but where will you get the money to pay for the repair?

If you budgeted your money effectively, you might have some money set aside for unforeseen expenses, such as the broken skate. Other common unforeseen expenses include car repairs and medical bills. As your personal income and expenses grow over time, the ability to adjust and maintain a budget will enhance your personal and professional life.

An Increasingly Important Skill

As we have entered the twenty-first century, increased knowledge and skills are required to compete in the changing workplace created by the world economy. The use of budgets is one of the most important skills to have in the new millennium. Allocating money, solving problems, and making decisions are skills needed to create and use either a personal or business budget. These skills are also critical for people who want to be ready to achieve personal and professional success.

If you learn good budgeting skills and are able to apply them to different situations, people will take notice. At your current job, you can impress your employer by suggesting possible budgeting improvements. If you help your boss now, they likely will help you later. Maybe your boss will write you a good recommendation for a future job. Or perhaps he or she will even help you find a better job when you finish school. Whatever the case, using your budgeting skills now can only benefit you in your future career.

Balancing your current budget, no matter how little money it may involve, will help you balance your personal budget in the future. You will be making more money when you begin your career, but balancing your budget then will involve the same steps that it does now. That way, when you do begin to earn more money—and possibly even have to balance a budget that includes a spouse and children—you will be well prepared to do it.

Success with budgets can be achieved. Many people start with basic personal budgets when learning to budget money. Tracking budget items and adjusting the budget over time gives experience that can be used with more complex budgets. Budgeting your allowance prepares you to budget when you have income from a job, for example. And budgeting part-time earnings prepares you to budget for your own business someday.

A budget may not make you rich. However, when used with creativity, budgets can provide a sound basis on which to make decisions that will be easy to live with. Even if you don’t have a lot of money to keep track of, there are still good reasons to learn budgeting skills.