It’s all about balancing those last greenbacks.
Pro tip: If you’re highly inclined towards organizational management and finance, or business in general, this article should – and I sincerely hope it does – interest you somewhat.
The word “budgeting” is enough to send my skin crawling. But I like to believe that it only sounds more complicated than it actually is – because it’s a fact that needs to be stressed in order to be fully conceived.
There are so many apps for budgeting available nowadays, that it shouldn’t be a hassle for too long, even for budgeting newbies. Only developing the habit of keeping your finances in check is the difficult part. And it’s a crucial habit to cultivate, especially for us cash-constrained collegiettes. As college continues on, I’ve contemplated more and more about budgeting, ruminating about the “real life” pros and cons of budgeting – specifically, from my own personal experience.
Here’s my personal take on the complex but exceedingly important topic of budgeting:
“Real Life” Pro of Budgeting:
An important objective in my life – as well as in life general – is to be able to ensure that every activity I participate in (exercise, my meals, my extracurricular activities, my time spent, my hobbies, my skills learned, my chosen courses, the people I spend time with, etc.) contributes to meeting my overall goals of acquiring a better well-being as well as a brighter future (both personal and professional). This process requires coordination and budgeting helps me to achieve this coordination by coordinating the activities of the various types I participate in order to achieve my objectives of a more stable financial future (budgeting my expenses), more predictable schedule (budgeting my time), as well as healthier body and mind (budgeting my calories and exercise as well as my meditation time in the mornings). Budgeting involves using a quantitative plan used as a tool for deciding which activities will be chosen for a future time period. In a business, the budgeting process involves preparing estimates of future sales, cash collections and disbursements. From my personal experience, I’ve set a limit on how many funds I will allocate to eating out, to movie tickets, and to any other personal expenses I may have every single month. I haven’t made this process overly formal, so that it remains sustainable and easy to maintain for my entire lifetime: I keep a mental track of how much I spend on unnecessary expenditures and leisure items, to the point that those expenses remain low enough that I can count them in my head and remember them easily. Sometimes, I jot everything down on paper in the form of T-charts, similar to the ones used in financial accounting, titling the top with the respective category (“Entertainment” / “Food” / “Leisure” / “Study Time” / etc.). For example, I generally go to the cinemas every two weeks (being an AMC Stubs Insider member certainly fuels my movie addiction) and when I do, I make it a point to never spend more than $20 on the entire movie and popcorn total (it’s already a high upper bound to begin with). Likewise, whenever I do groceries, I make it a mental point before I even walk into the store to restrict my budget to $15, never to exceed this limit. But, of course, I’m human and sometimes, when I do exceed my budget, I automatically adjust my budget for all other categories. So, if I overspend on groceries by buying something I didn’t really need, I automatically make a mental note of adjusting my grocery budget for next week/month by decreasing/subtracting the amount that I had just spent and gone over my limit by. This is akin to overcompensation. This way, I keep track of everything and expenses stay within the limit I aim for. Similarly, when I exceed my set calorie intake by a certain amount, I compensate through extra workouts/exercises or through lighter meals/snacks. This same logic and philosophy apply to bills, leisure time, work/life balance of time, etc. Budgeting is all about balance and documentation, and I fulfill both these criteria in some shape or form for all life categories in my personal experience.
Frankly speaking, the real-life benefit I have found from budgeting is what I call the spillover effect: by budgeting in one department of one’s life, it becomes supremely easier to discipline oneself in other areas of life. For example, once I learned to manage and budget my calories better, it became much easier to budget my exercise and workouts as well since both of them are complementary activities. Similarly, once I learned to budget my food intake and workouts well enough, I was able to easily apply this same discipline and philosophy to other areas of life, such as my time (thus improving my time management skills immensely, which particularly streamlined my life as a student). Once I learned to budget my time better, it again became easier and more second-nature for me to start budgeting everything else. The pro here is that, once I started budgeting one of the most valuable assets of my life (such as my money) budgeting and controlling other equally valuable assets of my life – such as my time and my calorie intake – became much easier and more intuitive. Controlling one asset successfully likely means that I can control other assets as well, allowing the gains of budgeting to ‘spill over’ to other areas of my life as well, hence the name ‘spillover effect.’ After all, health is wealth, and budgeting both means that one can control and manage both assets far better, with the proper coordination and accountability. Budgeting makes it possible to put everything that truly matters in one’s life into one’s own hands, so that one can make the appropriate changes to reap the best results, whether that be to manage one’s finances better (the ‘traditional’ purpose of budgeting), or manage one’s time better as a full-time student double-majoring in two different disciplines while working a part-time job (the millions of other applications that budgeting can be applied to).
What I mean by this is, once I learned to manage my finances better (spending less at groceries and movie theaters, and more on a gym membership or on occasional, meaningful treats), I was able to better budget my time, my workouts, my calories, and everything else that matters as well. After all, time is one of the most crucial assets in life, and budgeting one’s time successfully means that budgeting one’s funds and money matters shouldn’t be a problem. One must keep a mental check on all expenses and earnings (the two ‘E’s). However, I also wanted to share another example: I interviewed a current practicing CPA as part of an assignment for a former summer class and gained a lot of insight from her in the aspect of budgeting. She not only is a pro at budgeting, helping her clients and small businesses manage their various budgeting needs, but she also loves to budget personally – so much so that people come to her to have her create a budget for them free of charge. Needless to say, she has a proclivity for budgeting. In the interview, she shared the importance of budgeting: budgets help formalize business plans and goals and help direct and monitor employees. Budgeted income statements enable managers to assess how changes in materials, labor, and overhead impact the bottom line. As businesses expand their sales and grow their workforce, partners and managers begin developing more formal plans and budgets. Budgeting gives businesses a plan of where they wish to go. Still, firms must never cease learning and must continually adapt their plans. Although budgets are expressed in monetary terms, money is not the only way to measure success. Success is based on the number of people one can impact in a positive way and this social positivity model can benefit businesses. Budgeting functions as a great management tool. Most companies prepare long-term strategic plans spanning 5 to 10 years. They then fine-tune them in medium-term and short-term plans, which are more operational and translate strategic plans into actions. These action plans are fairly concrete and consist of defined objectives and goals. Short-term financial plans are called budgets and generally cover a one-year period. A budget acts as a formal statement of a company’s future plans and is usually expressed in monetary terms because the economic or financial aspects of the business are the primary factors driving management’s decisions. Budgeting increases the likelihood of both personal and company success. Her entire interview focused on the pros of budgeting since she rightly believed that the benefits of budgeting outweigh any inconvenience or discomfort that the budgeter may experience.
“Real Life” Con of Budgeting:
While budgeting has allowed me to manage not only my time, calories, exercise levels, fitness levels, and wealth better across the entire board, it has also resulted in a few unpleasant side-effects in my life. One of these cons is the constant feeling of restriction that I feel, in nearly every department, in order to carry out the act of budgeting itself: I must restrict my calorie intake to reach a goal weight, for instance. It’s a necessary reality, but it doesn’t make it any less unpleasant. I must restrict my expenditures and grocery expenses to a set level to build some savings, and ensure that I never have to borrow from anyone or depend on any institution for anything ever. I must feel restricted in order to know that I should not indulge in any more foods, or go the movies for a second time in a row within the same weekend, or spend too much on makeup supplies just because I want to try out a new shade. These are all wrong excuses; I cannot break the rules and budgeting is dominated by rules. It’s all about practicing moderation, and it’s a life lesson worth learning. This constant feeling of restriction has put me off mentally and made me despise the act of budgeting in the long run as well as in the short run – even though I know full well that budgeting has still helped me in many other ways and is good for me. Keeping a mental check running for every single expense or category in my life, whether that be calories or my time or my grocery budget, is quite taxing mentally, despite knowing that doing so is good for my well-being. This feeling of restriction can be quite difficult to grasp for many people and make them despise budgeting in the long run. Another similar con of budgeting that I’ve experienced personally is that, whether I write everything down about what I spend/eat/workout/budget or I factor it into an Excel spreadsheet, the act of recording and tracking everything reduces the sense of spontaneity that characterizes life’s most pleasurable moments. The best moments in life often happen spontaneously but documenting everything means that one is removing the factor of unexpectedness; this lack of spontaneity in life can make life quite miserable, boring, and downright wretched for many people and it has for me to a degree as well. Regardless, I still try to accept this negative feeling and endeavor to acclimate myself but it’s still difficult to get used to the absence of joy and pleasure that comes with spontaneity in an already ‘predetermined’ monotony-ruled college-dominating life. Budgeting certainly has its perks but the lack of spontaneity that it leads to certainly isn’t one of them.
Indeed, it does take up a lot of time and resources to perform budgeting, and since budgeting is such a perpetual activity that must be consistently done on a regular basis (fortnightly, monthly, etc.), it isn’t something that can be done as a ‘one-time thing.’ It must be embraced and incorporated fully into one’s routine in order to reap the benefits continually. Budgeting – the process of planning your dinero – is, after all, a “tentative” process: it is quite true that planning is only useful and accurate if it is elastic in nature. Plans can change – and should – in response to changing price variables, market conditions, the state of the economy, the business cycle, inflation, inventory levels, as well as a plethora of other business variables that characterize the accounting cycles within an organization. If plans aren’t tentative, and instead remain as ‘set in stone’ proposals, then businesses will fail to succeed and grow by responding to key changes and changing their own operations accordingly. Budgeting helps with coordinating these changes and to minimize the impact of any unintended consequences. The increased transparency provided through budgeting is a major pro of budgeting. Budgeting ties back to accounting as a whole: the basic purpose of accounting is to provide greater transparency by accurately following the principles of GAAP (Generally Accepted Accounting Principles). Budgeting allows for clarity about the use of public and private funds as well as any other reservoirs of money, which is necessary so that business representatives and officials within the organization can be accountable for effectiveness and efficiency. Spending within an organization is vulnerable not only to waste and misuse but also to fraud. Proper, transparent budgeting and accounting is the best policy for preventing corruption and maintaining high standards of integrity in the use of company funds. Budget decisions can profoundly affect the interests and living standards of different people and groups in society; transparency involves an informed and inclusive debate about the budget policy impacts. An open and transparent budget process fosters trust in society that people’s views and interests are respected and that company money is utilized well. After all, the aim is to get the most bang for your (or your company’s) buck and budgeting makes this happen more smoothly. Transparent and inclusive budgeting supports better fiscal outcomes and more responsive, impactful and equitable public policies. Budgeting helps one avoid going in haphazard to situations, and provides a helpful guidance towards spending for both individuals and businesses.
The stress and anxiety aspect of budgeting is a major con of the practice; it is a necessary pain, so to speak, in order to reap the benefits. The tension is so real! Crunching the numbers, realizing that one’s budget means compromises and trade-offs, and realizing the extent of how much one spends on unnecessary expenditures (or, for example, exceeds one’s calories every single day or under-budgets one’s fiber intake), can all be extremely difficult conclusions to come to terms with for the average person. It takes courage, and it will be challenging, but every single person has always told me that it is worth it. Often, people who have even a mild case of obsessive-compulsive disorder (OCD) start to obsessively track and budget their expenses, their workouts, their calories, their water intake, etc. and take budgeting to a dangerously unhealthy level. For those with such mental conditions, budgeting needs to be taught to them in a way that incorporates a healthy balance between moderation and control: discipline, once again, is key. Also, I think that, once a person – or an organization – begins to budget consistently enough and makes it a part of their respective routine, budgeting would become a habit. Of course, this would take anywhere from 3 to 6 months to become a full-fledged personal or company practice, but the benefits outweigh the time commitment involved in budgeting. I would even recommend creating an entire department within firms dedicated solely to budgeting. This would make budgeting a specific priority within the organization and help implement budgeting as a routine for the entire firm, streamlining their success. Indeed, budgeting only helps gear a company toward honing and developing its competitive advantage.
P.S. I highly recommend checking out Bears for Financial Success! Their student-run blog and Facebook page are extremely beneficial resources, not only for budgeting but for all your financial-related queries…..*because we all know how efficient and timely Cal Student Central can be*….
Think about it, ladies: budgeting could help us save our wallets and shop more online at Etsy. Consider budgeting and give it a try: it just might prove super useful to your needs!