gasoline, food, clothing, movies, and books are all examples of how individuals
spent money whether it be on a daily, weekly, biweekly, or monthly basis. According to Pew Charitable Trusts, eight in
ten Americans are in debt in some fashion (Holland, 2015). Debt is when
money is owed which may include but not limited to: a borrower, the government,
the bank, a business, or an individual.
However, there is a way to combat debt, and it is through
budgeting. A budget is when an estimate
of the income and expenditure is set for a certain period of time in order to
avoid overspending. There is a formula
known as a 50/20/30 rule which helps individuals set up a budget, tips on how
to make the most out of budgeting, and how business’ and corporations also
benefit from budgeting.
There are several methods which an
individual can starting budgeting in order to manage money more
efficiently. One method is known as the
50/20/30 rule in which finances are broken into three categories: living
essentials, savings, and personal spending.
The first fifty percent of the income goes to living essentials which
includes: rent, utilities, and necessities such as groceries and commuting to
work. The following twenty percent
should go towards financial goals which may include: savings, investments and
debt-reduction payments. Finally, the
last thirty percent of the income is to be used on personal spending such as
but not limited to: vacations, entertainment, and shopping. (Johnston, 2017)
In addition to the 50/20/30 rule,
there are budgeting tips that can be taken into consideration. One of the several tips is to budget to zero
before the month begins, which means that before the month begins, each dollar
of the upcoming income should be accounted for and given a purpose. An important note to take into account is that
every month is different, some months will require budgeting for back-to-school
supplies, vacations, birthdays, and holidays.
Another tip to take into consideration is debt, it should become a top
priority to pay off any pending debt in order to avoid interest. Furthermore, having a schedule will make budgeting
simpler by picking specific dates for expenses, such as paying rent and
utilities which are on a monthly basis.
In an effort to keep organized with money expenses an online budget tool
or cell phone application can be helpful, if calendars are not of first choice.
Budgeting is not just common amongst
individuals, but also among business’ and corporations. A facility that keeps a budget is able to
have a detailed analysis of how the company expects to spend money during a
current period. There are some companies
that create a budget based on an annual basis in order to have an outline of
needs in a specific department. In
addition, budgeting allows business’ to account for expenses and make sure it
is not waste on unessential items or overpay for economic resources. Aside from managing the flow of money, a
financial roadmap can be constructed in order to increase the budget amount for
future sale increases. (Vitez, 2018)
When taking budgeting into mind, it
can seem confusing, however, when looking at a couple examples it can be
concluded that budgeting is a beneficial habit that leads to a successful
outcome. An example of a business that takes advantage of budgeting is a
veterinarian. A veterinary office is typically equipped with expensive
technology such as radiographs, blood work machines, anesthesia machines,
surgical lights, veterinary monitors, incubators, microscopes, scales,
stainless steel tables, ultrasounds, etc.
At the beginning when the practice is new it has borrowed money either
from a bank, a borrower, or lender in order to obtain the equipment, therefore
it must be paid off in a certain amount of time. In order to pay off the loans on time and
more efficiently, budgeting is an organized way to address these payments along
with other payments due such as utilities, rent, employers, etc.