Tuesday, February 19, 2013

The REAL Value of Budgeting

The word “budget” strikes fear in the hearts of many, and there are several reasons why.

Creating a budget may evoke images of shoe boxes spilling over with wrinkled receipts and checkbook registers with columns of numbers that refuse to add up. Living on a budget sounds like a constricting and fun-diminishing way to approach life. Understanding a budget might appear to require a daunting level of expertise in spreadsheets and number-crunching.

But put aside for a moment the images of number-crunching, calculating, and balancing.

Instead, think about what a budget truly IS, and what it DOES. Sure, a budget is associated with accounts and balances, but in reality budget has a lot less to do with dollars and cents and a lot more to do with values and priorities.

In simple terms, a budget is the way your business, organization, or family allocates its’ limited resources among a number of competing interests. Journalist Gloria Steinem is credited with saying, “We can tell our values by looking at our checkbooks.” Your budget speaks volumes about what’s important to you, because where your resources go is likely where your priorities lie.

The term “values-based budgeting” is a term commonly invoked by government entities, highlighting their attempt to reflect constituents’ values in their budgeting process. But nearly all budgets – businesses, nonprofit organizations, families, departments, and even families – implement some level of values-based budgeting. If your business places value on cutting-edge technology, you may prioritize a tech upgrade over new furniture in the employee break room. Likewise, if your family values outdoor recreation, you may see more money going toward skiing equipment rather than fast-food meals or a bigger television.

So if you are one of the people who fears budgeting because it seems too complex, restrictive or confusing, don’t focus as much on the MECHANICS of the budget but rather the MEANING it represents.

To be effective with a budget in your business, organization, or family, you don’t need a degree in accounting, and you don’t need to be an Excel spreadsheet expert. Instead, you need to understand your priorities, communicate your values, find ways to compromise, and ultimately, be flexible.

A budget goes far beyond columns and rows of numbers to the heart of a business, an organization, or a family ... that is the REAL value of budgeting. 

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