Personal Budgeting: An Imperative

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By Michael Russell

Budgeting is a basic part of accountancy.

Nations, states, cities, towns and every incorporated company have budgets. Every private company, or other commercial entity, worth its salt has a formal budget. So why is it that the vast majority of people don’t use a formal budget in their private lives?

They do budget of course. We all do in one way or another. But very, very few people have a good enough memory to successfully budget informally – that is, without writing it down. And it’s when we forget to allow for some expense that we get into trouble. We get into debt. Isn’t that just about the worst feeling in the world – to be in unplanned debt?

To be poor is a sad experience – it’s a state of mind. To be broke is an uncomfortable experience – but it’s a temporary condition. To be in unplanned debt can be gut wrenching. And generally speaking, unplanned debt is just plain carelessness.

Why then does it happen? Simply because in the days before computers and calculators budgeting was a boring and time-consuming task. There was an awful lot of adding up to do and the darned thing had to be continually adjusted as time went by, usually every month at least.

So it was not surprising that most people just didn’t bother and as the generations passed by, so did the practice of ordinary people not preparing budgets for their personal finances. They just didn’t think that the value derived from maintaining a personal budget was worth the time consumed.

So what’s changed? One very important factor: personal computers – they’ve just made it so easy that if you don’t budget, you’re making life unnecessarily difficult for yourself. It is now well and truly worth the very small investment of time to input a few lines of data every week.

Because from that the computer can give you more financial reports than one person is ever likely to need. It will produce reports on tax deductions; about what you’ve spent; about where you’ve spent it, about what you’ve spent it on and it will do that for any given period of your choosing. It’ll find transactions that you’ve forgotten about but that suddenly you really need to know about. It will tell you how much money you will have in the bank next Christmas (or what you’ve got to stop spending money on so that you will have the amount of money you need in the bank next Christmas.)

The really big thing is that you will be in charge of your finances. It makes it so easy to explain to your dependents – be it spouse, partner or children; just exactly what the household can afford to spend, on what and when. Ninety-five percent of the arguments about money will go out the window because people will be able to see clearly what can and can’t be done. If we buy you that cell phone, we won’t be able to buy that game. You get the idea.

What software is best? Well there’s no shortage of it. It’s not expensive. The best is less than a hundred dollars and you’ll save that in no time flat. Check out the choices available, and choose the one which best suits your personal needs. It will be well worth whatever you decide to invest in it. And it will most definitely save you lots of headaches and heartaches in the long run, if used properly.

About the Author

Michael Russell
Your Independent guide to Accounting

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