Budgeting in a Philosophical Way Essay

Introduction

Writing conceptual is more demanding than writing on specific ideas or subjects, particular when the aim is to invoke philosophical, psychological, sociological, and historic aptitudes of the readers. Let us try to be specific and try to concentrate on the more economical aspect of human behaviour that may sum- up all those above-mentioned attributes for the aptitude of the readers. Everybody is a planner in some fashion or the other, and it is felt that those who plan generally achieve objectives with little margin of error. Budgeting is such an exercise that if the budget is well planned, sourcing and outflow of funds are bound to provide optimum utilization of available resources. So let us talk budgets in this write-up.

What is a budget?

• Budgeting is sound financial planning for your inflow and outflow of funds in a very subjective manner.
• Budget is a guide to help you manage your money in an organized and decisive fashion.
• Budget is basically the allocation of funds in accordance with the needs, purposes, and objectives of the person planning for his/ her budget.
• Budgeting is controlling money so that life remains cheerful and even miserable events do not pressurize your normal way of living.
• In fact, “Budgets are like your own personal small business statements. They are some of your income minus some of your expenses. What you are left with are disposable income.”¹

Qualities of Budgeting

The budgetary process is concerned with the present and future happenings and eventualities. Based on presently available resources, future actions are planned for the best use of those resources. From these points of view, the principal qualities of any type of budgeting are control, management, and planning.

• Control is the attainment of self-sufficiency in decision making in order to achieve the motives and objectives of the planner. Control is the power to meet destructive eventualities aiming at sure success.
• Management is the art of using resources to attain maximum success. Management thrives on leadership qualities, and those qualities develop with more practice. Management is also a combination of foresightedness and determination. Management is generally practised successfully by those who have leadership qualities and willingness to achieve the impossible.
• Planning is such a quality of budgeting that is coordinated in each and every move of budgeting. Planning is making moves by envisaging future eventualities. Planning may or may not achieve the targeted success, but it adds to the power of positive thinking and decision making. Planning in budgeting is used to determine the ways revenue will be used for meeting various types of outlays in such a fashion that ultimately budget turns out to be a surplus budget.

Creating a budget

1. Start with deciding or fixing a period for which budget is required to be created, say, month, quarter, half-year or full year.
2. Put together all information about income and expenditure from the previous period in one place as sources of revenue may be a salary slip, regular agreed-upon business withdrawals, bank statement for previous period to have an idea about interest, dividend and other investment income, and like that.
3. Similarly, all utility bills, house mortgage payments, car loan instalments, auto insurance, compulsory savings like life insurance payments, compulsory investments like mutual fund investments in affordable monthly instalments, entertainment expenses, expenses relating to tours and travelling, and other expenditure information of the previous period so that an idea about expenditure for the budgetary period can be envisaged.
4. Divide the expenditure and payments for the budgetary period into two categories of fixed expenditure and variable expenditure. Fixed expenditures are that expenditure, the amount of which is fixed for the budgetary period, for example, home mortgage, car loan instalments, insurance payments and like that. Variable expenditures are those expenditures or payments, the amount of which is not fixed. Those may or may not occur exactly in the same amount of payment in the earlier period, or they may not take place at all in the budgetary period. For example, travelling expenditure may not happen in the budgetary period. Then their variable expenses that change from period to period like groceries, gas expenditure, gifts, and others like that.
5. Total up your revenues and expenditure for the budgetary period.
6. When there is more revenue than expenditures that are to be paid off in the budgetary period, there is a surplus budget. Budget Surplus is “the amount by which a government’s, a company’s or individual income exceeds its spending over a particular period of time.”³
7. When expenditures to be paid out exceed revenue and other receipts, the budget is known to be in deficit. A deficit budget means you require more avenues to meet out the payments for the budgetary period. Those arrangements have to be made in a wise manner.
8. In order to meet the deficit budget, arrangements for accommodation loans are preferably made. Accommodation loans are loans from friends or relatives without interest, which are paid out at agreed upon a time out of your budgetary surplus. Loans from banks and other institutions carry interest, and those should always be arranged when no other avenue is available.
9. When it is difficult to meet the deficit, adjustments are required in order to curtail the expenditure. Like travelling can always be postponed to coming period if it is not business-related or otherwise very compulsory.
10. Budget made for one budgetary period become the basis for coming periods. But those parameters of need to be reviewed every time budgets are made out, taking into account the requirements of the period concerned. Like the purchase of winter clothing a few months earlier can be postponed unless there are customary sales or festivity discounts in the markets.

Powers of Budgeting

• Personal budgeting is a powerful tool of self-education that enlightens about earning capabilities. One can always work more if one finds that one is underemployed and one has time to work more in order to strengthen the economic power.
• On the same grounds, budget when in deficit, enlighten about your wasteful expenditures that needed to be curtailed as it has been seen often that sometimes expenditures are made just for the fun of spending. Useless or wasteful expenditure need to be socially discouraged as this carry a number of destructive evils that are socially as well as economically unhealthy.
• When a budget is made, and revenue and expenditures are divided into different categories, and organizational ability devolves upon the person making a budget. This ability is always useful in performing work duties with responsibility. Now improvement in any field is encouraging and fruitful. Improvement in business and work duties will reflect in the earnings. As a result businessman’s profits will go up, and for an employee, the employer may provide you ex- gratia from his/ her increased income.
• Budgetary habits and efforts are always fruitful. With increased revenue, as stated in the preceding para, one gets the power to cope with the deficit. There remains no worry about financing the deficit. You may not ask for accommodation loans from friends because of your increased revenue estimated for the budgetary period, or even otherwise no need to take a loan on interest. This will again reduce your future expenditure and results in more budgetary surplus.
• When a surplus budget is prepared, one may be induced to invest the surplus for the purpose of increasing revenue further. One may make a long term deposit with a bank to earn interest or learn the nuances of the stock market to raise investing abilities to earn more dividends, interests, and investment incomes.
• Under both scenarios of deficit and surplus budgeting, the budgeting efforts are going to improve upon one’s knowledge, abilities, and capabilities to make decisions in the ultimate analysis.
• Sometimes people encouraged by budgetary surpluses start spending for social causes, and this may give rise to the development of a special type of personality in the person budgeting regularly.

Philosophy of budgeting

There is a saying ‘live life as it comes to you’. That means one must remain satisfied with his or her circumstances. But life is meant to explore beyond one’s resources so that new vistas of happiness are enlightened. Budgeting is such a tool that brings success beyond the capacity of available resources because of the following reasons:

• Whenever there is deficit budgeting, an individual tries to explore all possibilities of generating more resources. This sometimes leads to the use of existing resources in creative ways to result in more revenue. For example, instead of withdrawing a fixed deposit with a bank, if somebody budgets to take a loan against that deposit, it will provide him with a sense of security. Such a feeling often lead to successes beyond imagination.
• Surplus budgeting means the availability of funds for use in a more resourceful manner. Investments are generally planned with surplus budgeting, and creative investments always lead to inventions of new goods and services for the benefit of mankind.
• A balanced budget means resources are perfectly used for planned objectives. So balanced budget provides a feeling of satisfaction, and such a feeling is necessary to keep the human mind working for more creative and innovative ideas.

So budgeting of personal resources for meeting desired objectives is an exercise that is positive in all its resulting facets, surplus, deficit, or balanced. As Prayer Trask has said, “We abide by the philosophy that the budget failures flow more from item forgotten than from errors in estimating identified items.”² So keep budgeting and be cheerful.

References

• ^1. Moneymanager.com.au., Step wise step guide to budgeting. Web.
• ² Prayor Trask, Financial Management. Web.
• ³ InvestorWords. Com, Budget Surplus. Web.