Advantages and Limits of Budgeting
Budgeting always makes me feel like I am going without something or sacrificing. It’s like dieting with dollars instead of calories. No matter how much of a positive spin I try to put on the concept of budgeting, it’s basically a form of self-restriction. And the ultimate benefit, making resources last or saving more money, is only appreciable in the long-term.
Of course, budgeting is a concept that every parent must always strive to perfect and mentally impress upon their children. Budgeting makes us realistically assess how to reach goals, estimate purchasing power, and prioritize need over want. The art of budgeting is a financial roadmap and recordkeeping skill that helps a family see how they can achieve their dreams.
Still, sometimes I want a Big Mac while I’m supposed to be watching my weight, you know? And if an adult can think of budgeting this way, imagine how your child might think of it. Just because you know budgeting is a necessary life tool doesn’t mean that they can appreciate the distinction.
Advantages of Budgets
The main thing to explain to your children, or to even remind yourself, is that a budget is a sacrifice to help you achieve an intended goal. A budget is required to help a family understand how much money they are making, how much they owe, and how they can improve their current financial standing. A budget can help you:
• Better distribute resources for various household expenses
• Keep detailed records of income, expenditures, and debt
• Help a family live below their means and save more money
• Clarify between needs and wants
• Strategize how to cut down on debt
• Impress upon family members the need to develop responsible personal finance skills
• Impress upon your children the variety of weekly and monthly bills that you are responsible for to keep the household running, like rent, groceries, insurance, clothing, car payments, tuition, medical, and so on
• Helps everyone to sharpen their skills in looking for deals, savings, and discounts when they shop
• Eliminate wasteful spending habits
• May articulate the need to open emergency financial accounts or funds to guard against unexpected expenses
Limitations of Budgeting
I hesitate to say that there are, “cons,” to budgeting. They are vital and necessary in personal, family, and business life. No government can function without a budget. Even so, budgeting can have limitations or become non-viable in a variety of circumstances:
• Strict budgets that don’t include emergency funds become null and void in the event of serious financial emergencies
• Budgets become useless if you are paid on an irregular schedule, are a seasonal employee, or experience extended periods of unemployment
• Budgets fail if everyone in the family won’t commit
• Budgeting and recordkeeping can expose how bad you are at personal finance and frustratingly require more budgeting and sacrifice
• You must dedicate significant periods of time on a weekly and monthly basis to budgeting and keeping detailed expenditure records
• Budgets must be updated and improved upon frequently to account for new bills, income sources, and to improve effectiveness
Budgeting Must Be a Regular Activity
The thing to remember is that there is a purpose to budgeting. That goal differs from person-to-person and family-to-family. Budgeting becomes a hindrance, nuisance, and intolerable if you and your family lose sight of the goals that necessitated the budget.