The Advantages of a Balanced Budget. Budgeting for savings may just save the roof over your head, even though that money may have been set aside for a vacation. Here are a few reasons why it’s important for the government to have a budget: Proper resource pool allocation When it comes to budgeting, identifying areas of weakness helps the government to allocate resources in a useful and sustainable manner. Limited Funds. When people are hurting, it is our job to take care of them. Most college students have limited funds to work with, which makes budgeting more challenging but also more important. Yes, we have. A balanced budget occurs when revenues are equal to or greater than total expenses. Balancing the … If the months of June, July, August, and December typically generate 75% of your business' revenue, your budget will allow you to plan ahead. I’m guess this is the same thing as having a line for contingency or savings on the expense side which would balance the budget. I fear no fellow American is willing to pay the price. Not having a balanced budget enables politicians and agencies to hide money. The content on this site is provided for informational purposes only and is not legal or professional advice. As noted above, the main advantage to a balanced budget is that you avoid incurring debt to pay your bills. What about baby boomer pension and health care liabilities? If a budget is being balanced you would think that an individual would automatically be cautious of their spending however, as you stated that sometimes their are times when you have to spend over your budget in situations such as social security and unemployment. The restriction of having to balance the budget keeps the country (like individuals) from overspending, the absence of a balanced budget enables congress to fund pet projects and black ops without the intense scrutiny of the public and finally having a balanced budget will diminish and eventually remove the huge deficit hanging over the country. It is a financial analysis of a specific period, generally, a year that helps to determine that the firm has enough monetary resources to … Why is it so important to have a balanced budget?” Fudge asked. Budgeting is simply balancing your expenses with your income. Similarly a country will run smoothly with a balance budget as you rightly pointed out in the hub. German 10 year bond yields are at record lows of 0.82%. The act of budgeting teaches proper debt management and helps you avoid the unpleasant consequence of relying too heavily on credit cards and loans to pay your bills. Everyone from individual families to the federal government use budgets to track their financial needs and account for revenue and expenditures over time. That is a philosophical, not an accounting, question. By not enforcing a balanced budget hard decisions are not made and never will be made. Business owners and key executives face hard choices every day, and even a single poor decision can have disastrous consequences for the success of the entire company. For many concerned citizens the reason budgets should be balanced is to avoid imposing harm on future residents, especially the next generation. Why is the balance sheet so important to forecast? That already includes resonable cutting on expenses. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters. This in turn will cause social strife and possibly the threat of civil or international war as the younger generation will be forced to carry more and more of the tax burden while benefiting less and less and the risk of defaulting with our creditors looms. The point of a zero-based budget is to make income minus the outgo equal zero. Thus, neither a budget deficit nor a budget surplus exists. A balanced budget is achieved by comparing your current income to your expenses and ensuring that the amount you spend does not exceed the amount you make. Not all applicants will be approved and individual loan terms may vary. That isn't to say the problems don't need to be tackled, but the urgency that says it's necessary right now is sheer fallacy. Great article, voted up. We are already in a position of never being able to repay this amount. When figuring out why is it important to have a budget, the most tangible benefit is the ability to make better decisions. But we need to prioritize what is really important in this country," she said. It may be getting out of debt, saving up for a home, or working on starting your own business. I am being told they need to show a net positive (i.e. We do not guarantee that the loan terms or rates listed on this site are the best terms or lowest rates available in the market. We have to ask ourselves who is benefiting from this debt. All lending decisions are determined by the lender and we do not guarantee approval, rates or terms for any lender or loan program. One of the key starting points is running balanced budgets – an idea that Macdonald-Laurier Institute Managing Director Brian Lee Crowley outlined in his book The Canadian Century. Another important benefit of a household budget is that it can alert you against possible cash flow problems in the future. Moreover pet projects like studying the wild platypus in the Antarctic are funded while veterans benefits may be cut. Congress knows with each bill they pass what the projected debt will be. There have been times in the not-too-distant past when lawmakers had to make difficult decisions to approve a balanced budget, and similar decisions might have to be made come January. According to (CITE GOSAR) article, it can be defined as "a business not spending more funds than they take in, as well as having a plan in place to never dip into debt." I have … Your budget creates a plan and lets you track it to make sure you are reaching your goals. They have also known fro decades that Medicare would need adjustments as baby-boomers began to retire. Reduces StressWhen you balance your budget, you know exactly how much disposable income you have to spend each month. Ultimately it is the people who are to do the balanced budget. With a budget, you can move to focus your money on the things that are most important to you. Arguments for the Balanced Budget Amendment . Origin Balanced budget requirements have a long history in state government. Brie Hoffman (author) from Manhattan on February 01, 2011: But: with 14 Trillon of accumulated dept and a deficit of lets say 1 Trillion per year i tend to say: we do have a balanced budget, only forgot to count the interest rate for the 14 Trillion. Money doesn’t have to make the world go round, but when we are better at budgeting, it helps make the world a better place. 2  My answer is a definite no. Balancing your monthly budget helps you meet your financial obligations without confusion or unintentionally taking an overdraft from your bank account. This allows you to enjoy luxuries such as a vacation or an evening out without the guilt and stress associated with wondering if you will be able to afford such expenditures. If they don't balance and you spend. I'm afraid many people confuse the two. Canada sleepwalked into staggering deficits between 1973 and 1994, resulting in the decimation of the public purse. They will not be forced to make difficult decisions and therefore will not make them. Clinton balanced the budget, but the debt continued to rise because neither party contributed the surplus to the debt. A Balanced Fund Provides the Best of All Possible Worlds, Maintaining the Health of Your Balanced Portfolio, Special Reasons to Avoid a Balanced Portfolio, Subscribe to news about Financial Planning, Start Up Business Tips: 3 Ways to Get Financing, Choosing between Money Market Accounts and CDs, Business Start Up Help: 4 Reasons to Form an LLC. Politicians will take the easy road and cater to whatever will get them elected. Budgeting helps us tell our money what to do, instead of the other way around. This spending plan is called a budget. Without a budgeted balance sheet company management cannot forecast the future financial health of the organization. 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