Change perspective on budgeting

Habitomic Journalist
Habitomic Journalist

 Budgeting is the tactical implementation of a business plan. To achieve the goals in a business’s strategic plan, we need a detailed descriptive roadmap of the business plan that sets measures and indicators of performance. We can then make changes along the way to ensure that we arrive at the desired goals.

There are four dimensions to consider when translating high-level strategy, such as mission, vision, and goals, into budgets.

Objectives are your goals. Then, you develop one or more strategies to achieve your goals. You need to track and evaluate the effectiveness of the strategies, using relevant measures.

Finally, you should set targets that you would like to reach by the end of a certain period. The targets should be quantifiable and time-based, such as an increase in the volume of sales or an increase in the number of products sold by a certain time.

Goals of the budgeting process

Budgeting is a critical process for any business in several ways.

1. Aids in the planning of actual operations

The process gets managers to consider how conditions may change and what steps they need to take, while also allowing managers to understand how to address problems when they arise.

2. Coordinates the activities of the organization

Budgeting encourages managers to build relationships with the other parts of the operation and understand how the various departments and teams interact with each other and how they all support the overall organization.

3. Motivates managers to strive to achieve the budget goals

Budgeting gets managers to focus on participation in the budget process. It provides a challenge or target for individuals and managers by linking their compensation and performance relative to the budget.

4. Control activities

Managers can compare actual spending with the budget to control financial activities.

5. Evaluate the performance of managers

Budgeting provides a means of informing managers of how well they are performing in meeting targets they have set.

The budgeting process for most large companies usually begins four to six months before the start of the financial year, while some may take an entire fiscal year to complete. Most organizations set budgets and undertake variance analysis every month.

Starting from the initial planning stage, the company goes through a series of stages to finally implement the budget. Common processes include communication within executive management, establishing objectives and targets, developing a detailed budget, compilation and revision of budget model, budget committee review, and approval.

How can you create a budget that works for you?

A budget can begin your journey towards achieving your goals because it lays out your dreams and plans for the future. It also serves as a road map to attaining these visions!

Understanding why having a budget is so important to attaining financial freedom is just one piece of the puzzle!

Here are some tips and ways to change your perspective on budgeting!

1. Make the budgeting process fun!

Instead of cramming budgeting in ten minutes before bed after a long and stressful day, set aside a solid block of time.  Adding activities, you enjoy doing to the budgeting process will foster a positive experience at the moment and create enjoyable memories. This increases the likelihood of you continuing to budget, and ultimately succeeding!

2. Focus on the positive

Instead of dwelling on what you can’t afford, focus on figuring out what small steps you can take to achieve your goals. Try to find the areas you don’t mind cutting back on so you can allocate more funds to the things you love.

3. Use a Strengths-based approach

Strengths-Based Budgeting (SBB) is creating a financial environment that focuses on utilizing the unique talents and strengths of its creators. SBB strives to use an individual’s natural style. Which is largely based on their unique personality, experience, and areas of talent.

An individual can discover their areas of natural talent through tools such as the Via Character Strengths or Gallup’s StrengthsFinder Assessment.

Both online tools help individuals understand their unique talents. Leveraging these talents helps them become more effective in their personal and professional life.

Note that instead of pouring time and energy into marginally improving our weaknesses, we should clearly identify our innate talents and be intentional about bringing those talents to bear.

So, Strengths-Based Budgeting allows individuals to better understand, engage, and use their greatest talents to become financially fit and create budgets that enable them to reach their goals!

4. Understanding where you are is not forever.

Putting those figures down doesn’t condemn you to that place for your life. It’s just a financial GPS so you can see where you are right now.

 5. Embrace the hope that follows budgeting.

Once you begin budgeting, you will be surprised at how much more hopeful you feel.

6.  Find a method to make it easy and convenient.

Find a way that works for you, whether it’s on paper or the computer. The longer you create budgets, the easier it becomes, and the more you can see the distance you have covered.

7. Use the power of the Wow! Factor.

It’s about figuring out the opportunity costs, determining what you truly value, and what really fits you and your family today. Integrating these areas brings lots of joy and satisfaction to the process and follow-through.

8.  Remember that budgeting is a tool.

It is a means to an end to help you to achieve a goal. When you realize this, you can let go of the negative emotions attached to budgeting.