Remaining budget at the end of the year? What happens then? First, understand what a budget is not. It is not a bucket to accumulate funds for various activities. Nor is it a straitjacket, nor a scheme to show what we cannot do. A budget is a highly targeted tool, designed to achieve specific goals. It is our best estimate of time, talents, and money to achieve particular objectives. I repeat; the budget is not money to spend irresponsibly as we get closer to the end of the year.

We budget to try to make sure that we have the resources to achieve our goals in the budget period (usually one year). We do not focus on the remaining budget in isolation, at any time. Instead, we look holistically at the goal and the resources needed to complete it.

When we budget, we start with goals and then calculate the resources we need to achieve these goals: time, skills, and money. Once we complete the goals, the budget expires, even if we have budget left. This is the only way to avoid silos and encourage effective use of resources.

It is necessary to reallocate the remaining budget after completing the objectives

After completing our goals before the end of the year, we must not be lavish like governments and find creative ways to waste the remaining budget. When we reach the goal (or goals), we do not spend overestimated funds. We don’t know the future, so it’s reasonable that we didn’t budget correctly. “Return funds” to the “central pool” for optimization in the organization. Conversely, when we underestimate, we must re-examine our goals and, as necessary, request additional funds or change goals to stay within budget.

One of the reasons governments waste our tax dollars is that they focus only on money, the size of budgets, rather than goals and programs, and the best ways to do it. Another reason is that they get away with this practice, and we expect governments to be wasteful and inept.

When making the budget, we must select the best path to the goal as weidentify gaps and potential opportunitiesthat may arise during the budget period. This approach is obvious, but many people don’t do it. Either they do not prepare a budget, or they budget after starting their trips. Alternatively, they focus on money regardless of their goals. Careful budgeting in advance of the event allows us to examine alternatives to show likely ways to handle potential gaps and opportunities.

Budgeting is budgeting: choosing the plan and methodically estimating and recording its cost to achieve a specific goal or goals. It is to write the road map and the monetary map, the planning and evaluation of the Budgetary Control of PAZ, the calculation of the cost before the action stage.

Budgeting is an iterative process

The budget is iterative. We need to go through a few cycles to prune projects and cut tasks to reduce expenses to disposable income. This procedure is standard and the only way to be debt free on a fixed income. Don’t cut costs (especially across the board). Cutting programs and tasks and their associated costs will disappear. When we cut costs, we don’t focus on the goals (programs and functions) and therefore underfund some and overfund others. Also, unreasonable cost cutting encourages games where people submit high budgets knowing that management will cut them. As a former CFO, I saw those games that don’t benefit the organization as a whole.

It should be obvious why we should budget. Still, I will repeat it. We budget before a planned event to see if we will have enough funds to meet our goals. Don’t just look at what has been spent in the past and increase that number to get a budget. Instead, decide on the goals in the budget period first. Only after completing the development of the goals do we cost them?

budget example

Suppose you planned to go to Vancouver (your goal) and estimated the cost at $500 (budget), but you only had $300. He would start his trip if he believed that he could reduce the estimate to $300. So you would consider different alternatives such as:

  1. taking the train

  2. shorten the stay

  3. Invite a friend to share expenses

  4. Other options

A realistic budget will reduce your stress and show you likely paths to your goal. You don’t know the future, which will probably change based on your budget. Therefore, you are likely to fall short of budget unless you take a flexible budget approach.

Suppose you started the Vancouver trip without a budget and spent all your funds before the end. After you start your trip, you lose some options available to you to reduce expenses. During the trip, inadequate funds would force him to choose between current alternatives. When you budget before you start your trip, you have more alternative solutions to choose from.

Not budgeting and then spending all your money halfway through would challenge you. Your stress would increase and you and your spouse would argue. Also, you would have to change the goal or plan:

  1. Go home and not go to Vancouver.

  2. Go to Vancouver but stay fewer days, or stay in cheaper places and lower budgets for items like food, sightseeing, etc.

  3. You can finish the trip with borrowed funds.

Often people and companies say they budget but don’t make a profit. I’m not surprised. start a budget PAZ Budgetary Control (PEACE);it is not the end, but a part of that procedure. When you make a budget, you get benefits only if you follow both elements of PEACE,budgeting and control.