Determining causes and effects of not keeping a personal budget William E. David
ENG115- English Composition
Prof. Sandra McDonald
March 10, 2015
It has been observed that most of the employees of Bank of America create individual budgets but do not keep a record of them. This is because most of the employees return to the bank for personal loans just two weeks after receiving their salaries. Due to this finding, the factory utilized financial analysts and decided to develop measures of controlling and curbing extravagance among the bank’s employees by enabling them to be able to keep their own budgets. The financial analyst described a budget as a compass and a mirror of how funds will be spent. It is termed as a compass since it directs those who use it into the life of wise spending and as a mirror because it reflects how money ought to be spent. Alternatively, a budget is a tool that provides earners with crucial information that helps them to manage their finances (Brott, 2007, p. 55). It is always better to be aware of potential over-spending than to spend recklessly without being aware. This awareness is what a budget creates. People who spend while keeping their budgets in mind are cautious spenders because the budget prevents them from being extravagant and impulse buyers. In the case of budgeting, a spender is able to attend to most, if not all, the elements that require spending in order of importance. It is clear that many people are well informed of the amount they earn but lack the knowhow of how they spend it. Most people fail to keep their budgets due to such budget blunders as setting impractical goals and giving up too soon on budgets. Some are driven by ego into spending more than reasonable because they are motivated by the urge to maintain a high reputation. The cause of one not living within their own means draws the effect of long term financial hardship. After an internal research on the employees’ financial discipline, it was discovered that the major cause of not keeping personal budgets was due to impractical goals. Impractical goals may emerge if one does not carry out a proper market investigation before preparing the budget of products and services that will be used in a given period of time. The first step in starting a budget is to add up all income along with all expenses, then juggle the two until one gets the income equal to the expenses (Brott, 2007, p. 53). Monitoring budget balance is another important aspect in keeping a budget because not being able to monitor a budget is an impractical activity which results into an impractical goal. While monitoring budgets, recording the dates when transactions were made is very crucial. Furthermore, checking personal bank accounts consistently is another approach of budget monitoring. With these in mind, it is rare to create impractical goals since one is constantly updated about available finances. As observed, the immediate economic effect that an employee who has experienced the outcome of impractical goals is; limited funds. This is a negative effect. The individual may settle on borrowing money in order to supplement limited funds. This may be the reason why the number of bank employees asking for loans is on the rise. Borrowing indirectly implies getting into debt. A debt is an economic distress. Another economic effect brought about by impractical goals is rather positive in that when the individual is granted a loan by a bank, the bank will benefit through the interest that the loan will generate. Therefore, the negative effects can only be avoided through making practical goals. Practical principles are the principles that depict wisdom and caution in spending. By observing practical principles, an individual is able to live in a world of personal finance - a life with no debts and absent of financial distress. Some of the practical principles are reality checks; change in over spending...
References: Brott, R. (2007). Basic Principles for Maximizing Your Cash Flow - 7 Steps to Financial Freedom! United States: ABC Book Pub.
Mulonas, D. (2004). I’m not flipping burgers when I’m 70! Edgewater, NJ: New Art Press.
The Blokehead. (2004). Minimalist: How To Prepare & Control Your Minimalist Budget In 30 Days. United States: Amazon.
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