Budget? |
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Budget generally refers to a list of all planned expenses and revenues. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods.
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Personal or Family Budget
A personal budget is among the most important concepts of personal finance. In a personal or family budget all sources of income (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows. There are a wide variety of personal budgeting methods and tools that can be employed to help individuals and families with the budgeting process.
Government Budget
The budget of a government is a summary or plan of the intended revenues and expenditures of that government. In some countries, such as the United States, the budget is mainly prepared by the legislature, in others it is prepared by the government. In the UK the budget is prepared by the Chancellor of the Exchequer, the second most important member of the government, and must be passed by Parliament.
Corporate Budget
The budget of a company is compiled annually. A finished budget usually requires considerable effort and can be seen as a financial plan for the new financial year. While traditionally the Finance department compiles the company's budget, modern software allows hundreds or even thousands of people in the various departments (operations, human resources, IT etc) to contribute their expected revenues and expenses to the final budget.
If the actual numbers delivered through the financial year turn out to be close to the budget, this will demonstrate that the company understands their business and has been successful driving it in the direction they had planned. On the other hand, if the actuals diverge wildly from the budget, this sends out an 'out of control' signal and the share price could suffer as a result.
The future
As the technology of money and banking continues to make spending easier, individuals, families, companies, and governments need to adopt more effective budgeting methods, strategies, and tools to balance their outflows to their inflows and avoid deficit (or debt-based) spending.
Presently nearly all large businesses reforecast their original budgets on a quarterly basis. As months pass and the actual income achieved and expenses incurred can be compared to the budget and forecasts. The variances between these financial plans and actual delivery can then be analysed to provide valuable information used to drive future performance. The future sees traditional annual budgets being replaced or complemented by monthly forecasts or rolling forecasts. Monthly forecasts provide fresher and more up-to-date financial plans.
As an adjective, budget is used in marketing as a euphemism for inexpensive or cheap.
