The How and Why of Budgeting, Part I

gold piggy bank on pixabay.comHere’s my version of why you need a budget, unless you’re independently wealthy and your tastes are inexpensive, and how to prepare and maintain one.

Budget psychology

Maintaining a budget is a very good financial practice to get into. It helps you make sure that your expenditures don’t exceed your income. Yet, according to financial advisor Suze Orman, who appeared on the Oprah Winfrey show on October 13, 2008, organizations and individuals usually don’t prepare or maintain budgets because they don’t want to know the details of their finances. They believe that a budget will reveal to them how little money they have and depress them. A few years ago I offered to prepare a tax return for free for anyone who answered a questionnaire consisting of sixteen straightforward questions. I had hoped to use the answers to help me market my services better. One of the questions was about budgeting:

“Do you actively maintain a budget?” The answer given by almost all of the thirty or so people who responded was “no”.

Why is it so important that you maintain a budget?

A budget helps you control your spending so that you can have the money needed to pay for what you ultimately want, like a new car, a new house or a college education. You wouldn’t simply deposit a sum of money each month into a bank account to have the funds available for your desired item, because first you’d have to know how much you can afford to deposit each month. To know that, you’d have to have a budget, as it would tell you how much you can afford for the desired item.

Author: Gary Krupa

I'm a CPA, married, with two cats, I play the accordion and speak French. I live in Sedona, Arizona in the Village of Oak Creek. I grew up in New York, and also lived in Southern California, the North Bay region of the San Francisco Bay area, and elsewhere in Northern Arizona. While in college, I introduced to the Accounting Society a corporate version of Monopoly called "Corporate Monopoly". Visit my custom website at http://garykrupacpa.com for very informative, interesting and up-to-date information about how to improve the state of your finances! It's where political correctness is kept to a minimum and financial helpfulness to a maximum.

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