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Guest Post – The Best Definition of a Budget?
Budg-et (buj‘it): noun Freedom
The question the speaker asked the group was simple, “What is the best definition of a budget?” Thinking the question was a bit academic and boring, I was not interested in hearing the definition until I heard his answer. Thoughtfully, he wrote the definition on the board in front of the class: the word “FREEDOM.”
You are out of your mind was my immediate reaction. A budget constrains spending. If I adhere to it, it will keep me from spending funds the way I want, when I want, and for what I want. How does it provide freedom?
The speaker went on to explain that if a person has a budget that functionally meets the goals his family decides are important, it will provide the freedom to be “worry free” when it comes to finances. People with budgets know at any given time if they are on track in reaching their financial objectives. They know if the balance between income and spending is healthy and know how much they have available to spend in various areas.
If, for example, a family decides they want to have a fabulous vacation next summer, they need to determine the amount of money they need for such. They can then structure the way they spend the rest of their money around this primary goal. When it comes to determining how much they spend on clothes, eating out, or the kind of cars they drive, their decision will be based on their knowledge of how much money they need to set aside for their vacation. The budget will provide the guidelines needed to make everyday purchasing decisions.
I thought for a second, How many times have I walked through a store and spied a jacket or home repair tool that I wanted to purchase? If I had known how much money was set aside for such purchases I would have known if I could have the item or not. Since I did not have a budget, my decision was based on a guess. A budget would have provided the freedom not to have to worry if the decision to buy one of these items would force me to scrimp elsewhere.
Most people worry about their finances. In fact, the stress associated with money is one of the major reasons most married couples argue. A realistic budget forces a family to establish priorities and allows them the freedom to spend their money in areas they have identified as most important to them. Identifying spending priorities allows the freedom to work together in support of mutual goals. Couples are no longer pulled away from one another because of finances but are instead working together in support of one another. Knowledge of family resources and priorities provides a foundation upon which to make wise financial decisions – decisions that build family relationships.
Of course, the process for crafting a budget can be somewhat complex, but once it is initially drafted, all that is needed is periodic fine-tuning. Yes, life changes, new needs evolve, and goals are altered. A well crafted budget will provide the flexibility to allow for these changes with each new version.
So the speaker was right. A great definition for a budget is “freedom.” A realistic budget provides the freedom to make wise financial decisions. With such, people can be free from worry about their present circumstances and future financial fitness. They know everything will work out if they simply concentrate on making purchases that support their budgets. Yes, a budget does indeed provide financial freedom.
American Missionary Fellowship offers a personal finance workshop, Fiscal Fitness. For more information about attending or hosting a workshop in your area, give me (Bryce Bartruff) a call at 610-527-4439, ext. 104 or email me at fiscalfitness@americanmissionary.org.
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Good for economics students. My brother saved this article for his assignment. Thanks lol