Financial Management || Budgeting and Planning

지난달

How do you save, how do you plan for your retirement?

Good day and welcome to my blog. We’re going to look at those issues mentioned above as it regards to finance and our lives and financial matters.

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I’m glad to be able to share my thoughts again, irrespective of many distractions in my country right now. Anyway we can talk about that one later.

We are talking about financial management.

When we talk about financial management, what do we mean?

When we talk about financial management, we mean all those actions taken by either individuals, cooperate organizations or the government. In raising money, managing that money raised and deploying it to effective use to the extend that at the end of the day people will have value of that money.

First consideration on good financial management

So, financial management doesn’t end in just getting money, you have to think out; ways of getting this money.

• Are you sourcing it by your savings, are you raising it through procurement of loans, or are you getting it through all other sources?

• When you get this money, where do put it, what’s your plan in the terms of deploying it in various uses?
After deploying it, what is the end result?

• Are these money going to be used for what it’s meant for?

These explanation applies to both individuals, cooperate organizations, or government. In each of these, the dimensions may widen but same principle applied.

So when we add prudent to it, what does it mean?

When you add prudent to it, it means that your eyes are on the usage; in other words, you avoid extravagance, and then you plan the use of that money because remember that it’s said that ‘failing to plan is planning to fail’. To be prudent with the management of resources or finances, first of all you have to plan that spending through what we call budget.

Budgeting

Budget means a plan, take for instance; you have some money; say $100, you have to arrange how this money should be used because you don’t arrange it, the chances are that money meant for school fees could be deployed to entertainment of visitors, and money made for house rent could be used to pay a town union dues etc. so you have to plan and say; out of this $100, $20 is for children school fees, $40 is for house rent and all that. This reason is that at the end of the day you’ll know what each figure is going to handle. And again, because you’re being prudent, you’ll be able to know it this $100 that we’re using as an example here will be enough. But if it’s not enough, what do you do, are you going to borrow? This also will inculcate the habit of saving because you now know that if you don’t save, you can’t get money, and if you don’t save, it means you’ll end up begging or looking for loan.

Should every family, cooperate organizations, and government do budgets before the fiscal cash?

Yes, in fact that the fundamental thing they all need to do if they want to survive; both as a family, cooperate organizations and the government alike. You should do budget even when the money isn’t yet in your custody because budgeting includes how the money will come in the first place. The place where you expect your money to come from is part of your budget.

When these money comes into a pool, how do you deploy them? It’s also part of the budget, and after deploying them, you equally track your budget to know if it’s effective in achieving its aim.

For a family like me; a farmer in West Africa, I have a wife, we can now decide; how much do I earn as the father of the house, how much does my wife earn? When we put our earnings together we’ll now have a family income purse which from there we’ll begin to think on what are our priorities, for school fees, how many children do we have? In my case we have three. Then we can consider our house rent, how much do we pay, what nature of an apartment are we occupying, what project are we planning to embark on? All these considerations will depend on the quantum of money that coming from both myself and my wife. When we deploy them like that it means we’re now being prudent because the money isn’t being used for what it’s not meant for. Prudent in this essence simple means that we deployed this money for what it’s meant for.

This is the method which I also apply in my farming business. In my upcoming post, I’ll continue to elaborate on the this issue of budgeting, planning and saving which all make up a good financial management.

Make sure you’re avoid waste, make sure that whatever money you deploy will be result oriented; there would be a value at the end of the day, this applies to cooperate organizations and the government. In my country right now, various tiers of government are already working on their budget, in fact our president just read the national 2021 budget last week. Remember, we’re still in 2020 but here comes the budget of 2021.

That budget sets out all the sources of income, the various ways of deploying them, and all that. That’s a plan.

What happens when you budget and unable to meet up with your budget?

Let me make it clearer the question here. Take for instance, you budget, you know your income and a whole lot, but at the end your income does not match the budget, what do you do?

During budgeting process, if you discover that such situation has arisen, because you should know that when you budget, that’s when to know if there’s a gap; such gaps occur when your expenditure proposal appears to be higher than your income proposal. In that case you enter into what is called deficit budgeting.

How do you resolve deficit?

You resolve deficit by start thinking on how to borrow; how do you borrow money to argument the revenues you have in order to have a balanced budget because every income source must have an outflow.

If you have ignored budgeting and planning, you wouldn’t have pinpointed a deficit in the first place, rather you could have been spending money because money is coming. This should show you the essence of budgeting.

Thanks for reading.

Max.

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