Every year with the coming of February there is a lot of noise and hype about the budget. Everyone near and dear to you and the media is talking about the budget and how it is going to affect you. While many of us don’t understand the importance of a budget. So, let’s understand the budget and its importance in this article.
Budget is what?
According to the Oxford dictionary, the meaning of the term Budget is as – “A plan of how to spend an amount of money over a particular period of time; the amount of money that is mentioned.”
So, in simple meaning, it is a plan where you write down your expenses that are going to occur to you. This plan is generally made for 1 year.
One thing I had heard since I was a child is that the Indian finance minister is going to present a budget. So, purchase these things before they become expensive. I guess you might also have heard the same thing from your parents, elders, or on TV.
Budget Importance
Have you ever felt that no matter how much money you earn in a month at the end of the month all you have is an empty wallet and bank account? Then, in the end, you think about how much money I have saved and you find out that you have not saved any money. Then you try to remember where all of your hard-earned money went? You are puzzled and can’t figure out where the money went and this process keeps ongoing every month and then the year and sometimes your whole life is passed in the same condition. This is the typical example of a common man and then we curse our luck, boss, job and salary, etc. But these are not the real problems. We lack proper planning and stick to this plan. We need to write down our expenses and how we should spend our money and avoid spending on unnecessary things. (I have already talked about the importance of writing down your expenses and providing you with the excel sheet for the same. Check out the previous article here.)
This is where the budget comes in handy. It is one of the panaceas to cure all your finance-related problems while I am not saying this is the only solution the importance of it can’t be neglected. If you keep a record of your expenses and make a budget then you will say n
o to many expenses which can take most of your income from you. It is like a warrior going to war with proper planning and weapons.
Budget of Nation VS Your Budget
We as individuals and our country are no different in terms of many things. Both have their sources of income and expenses. If managed properly, there are chances for growth and if not managed properly then both are ruined.
Individual < Family < States < Country < World
If at any level there is a lack of financial management then make sure the path to financial death is ahead of you.
Understanding this with Example.
Suppose there are two persons Pankaj and Munit. Pankaj being financially aware keeps a record of his expenses and says no to most of the expenses which are not mentioned in his budgeting plan. But Munit on the other hand spends wherever he wants.
They both earn the same amount of money 5 lakhs in a year. Pankaj kept a budget and decided not to spend more than 4 lakhs in a year and save 1 lakh. Munit didn’t keep any such records and found that in the end, he had spent 5.5 lakhs. This means Munit has spent more than his income while Pankaj has saved 1 lakh from his income. Who do you think has more opportunities to grow and be free from the Debt Trap? It is of course the one who managed his finances properly. While there are chances that sometimes you can spend more than what you have mentioned in the budget, overall you have control over your money once you track a record of it. It is the reason that most countries and businesses keep records of their income and expenses and also prepare a budget. If they don’t do this important task then they will collapse. Then why don’t we learn from them and do the same for ourselves?
Well in this example, Munit has spent more than his income, and this situation is termed as a “fiscal deficit”. Read more about Glossary Related to Budget
Hope you will also keep a record and prepare well and ahead. Wish you success for both you and me! Keep visiting.
