Budget an Old Alliterative Adage

¶ … Budget

An old alliterative adage maintains that "prior planning prevents poor performance," and this is certainly the case with personal budgets today. In order to successfully navigate the difficulties associated with keeping a solid credit rating and ensuring that a household has sufficient funds available to meet day-to-day living needs, it is absolutely essential to understand how much money is coming in and where it goes every month. The personal budgeting process, though, is fraught with opportunities for fudging here and there in ways that can doom the enterprise entirely, but there is some solid guidance available to help the novice develop and adhere to a budget today. In this regard, this paper provides a review of Ivan Cintron's article, "The Art of Savvy Budgeting" (2000), followed by a summary of the research and important findings in the conclusion.

Review and Discussion

The importance of a sound budgeting process cannot be overstated. Indeed, the current economic fiasco that the world finds itself in today did not happen overnight and it did not happen by accident. Most authorities agree that the financial meltdown being experienced by businesses and governments around the world is attributable to poor financial practices that ultimately involve the budgeting process. Unlike many businesses and most governments, though, individuals are unable to simply borrow more money (or print it), and must make do with the resources that are available. Because resources are by definition scarce, understanding how much money is coming into a household and what routine expenses are required to keep it operating just makes good sense. Certainly, there are also unexpected expenses that can wreck even the most thoughtfully formulated budget, but even here there are steps that individuals can take to plan for such eventualities in the budgeting process. When the budgeting process is done well, people can free up resources they may not have realized were available for more important applications such as investments. For instance, according to Cintron (2000), "Financial planners, investment advisors and tax specialists say establishing a sound strategy that accounts for your everyday spending, credit and tax management practices is a cornerstone for building wealth and should keep you from sabotaging your investments" (76). Many people, of course, live payday to payday and may not believe they have any surplus funds available for investments or even to satisfy existing bills and expenses. Nevertheless, Cintron emphasizes that by keeping careful track of where money is spent, even on a daily basis, individuals can reduce their needless expenditures, satisfy their existing bills and needs while freeing up money they may not have realized was even there for other purposes. In this regard, this author emphasizes that, "Often, people will visit a planner or accountant looking for advice and say they have no money at all to invest, but a careful examination of where your money is really going -- from that weekly excursion to the record shop to buy $100 worth of the latest CDs to that tax deduction you are not taking -- can be an eye-opening first step toward establishing a realistic spending plan" (76).

First and foremost, just as with any type of thoughtful plan, a personal budget must be written down and be completely thorough. According to Cintron, this is one of the most important parts of the personal budgeting process but it may also be the most difficult for many people. "Put it on paper," Cintron advises, and adds, "The first step to creating a budget is simple: put down on paper what you are spending your money on. That sounds easy, but it takes discipline and honesty -- in other words, do not omit anything, no matter how small" (76). In fact, many of the clients who seek out Cintron's advice simply guess at how much money they are spending each month without ever committing a single item to paper. By listing all expenses, though, even the trivial ones, people can make a decision concerning how important these expenditures are to their lifestyles and eliminate those that can add up without people realizing it. For example, Cintron also notes that, "Cut unnecessary expenses. Once you see [what you are spending] in black and white, you can figure out what you can cut. I call it going on a money diet" (76). Committing these figures to paper also helps to eliminate unnecessary spending, impulse purchases, and identifying less expensive alternatives to existing buying habits in ways that can free up real dollars every month for almost anyone. Some real-world suggestions offered by the author include ensuring that video tape rentals are returned and bills are paid on time to avoid late fees, setting aside money for regular savings before paying anyone else, finding service providers such as cleaners that offer discounts and use credit cards only in emergencies (Cintron 76). Other timely steps at this time of year that can also contribute to an effective budgeting process include maximizing 401(k) contributions, ensuring withholding taxes are at appropriate levels, ensuring that all allowable deductions are taken, keeping track of business-related mileage and so forth (Cintron 76).