Question

If the Department of Defense (DoD) implemented the plans described in its 2019 Future Years Defense Program, its base budget (which funds normal peacetime activities) would climb from the $617 billion requested for 2019 to $735 billion (in 2019 dollars) in 2033, CBO estimates. Most of that increase would result from increased costs for military personnel and operation and maintenance. Base-budget costs would substantially exceed the share of funding that DoD has previously received under the Budget Control Act’s funding caps in both 2020 and 2021, the final years subject to those caps. Estimated costs based on historical trends instead of some of DoD’s estimates would be about 5 percent higher over the 2019–2033 period."

And Congressional Budget Office which the article above discusses the Fiscal Policy module. Explain the spending and budget of government on different departments

Answer 1

Budgeting is the most basic and the most effective tool for managing your money. Yet, most people avoid doing it because it is additional work, much like cutting your lawn or fixing the roof. Budgeting also connotes that you have to give up and stop yourself from enjoying stuff.

What budgeting actually does is clearly show you how you allocate your money and present you the choices on what stuff to enjoy – based on your financial limitations. It will save you the grief of overspending and being too much in debt. Budgeting does not stop you from enjoying stuff, it ensures that you enjoy stuff when you want it.

Although budgeting is indeed more work, it pays off with many life-enhancing benefits:

Benefits of Budgeting

1.   Gives you control over your money – A budget is a way of being intentional about the way you spend and save your money.    It is said that with budgeting, you control your money and not your money controls you. Budgeting saves you the stress of suddenly having to adjust to lack of funds because you did not initially plan how to spend them. It also helps you decide if you want to sacrifice short term spending like buying coffee everyday in exchange for a long term benefit like a cruise vacation or a new HDTV.

2. Keeps you focused on your money goals – You avoid spending unnecessarily on items and services that do not contribute to attaining your financial goals. If you are working with limited resources, budgeting makes it easier to make ends meet.

3. Makes you aware what is going on with your money – With budgeting, you are clear on what money is coming in, how fast it goes out, and where it is going to. Budgeting saves you from wondering every end of the month where your money went. A budget enables you to know what you can afford, take advantage of buying and investing opportunities, and plan how to lower your debt. It also tells you what is important to you based on how you allocate your funds, how your money is working for you, and how far you are towards reaching your financial goals.

4 Helps you organize your spending and savings – By dividing your money into categories of expenditures and savings, a budget makes you aware which category of expenditure takes which portion of your money. That way, it is easy for you to make adjustments. Budget also serves as a reference for organizing your bills, receipts, and financial statements. When all of your financial transactions are organized for tax time or creditor questions, you save time and effort.

5. Makes you decide in advance how your money will work for you.

6. Enables you to save for expected and unexpected costs – Budgeting allows you to plan to set aside money for emergency costs.

7 Enables you to communicate with your significant others about money – If you share your money with your spouse, family, or anyone, a budget can communicate how you use money as a group. This promotes teamwork on working for common financial goals and prevents conflict on how money is used. Creating a budget in tandem with your spouse will avoid conflicts and resolve personal differences on how your money is spent.   Budgeting teaches family members spending responsibility and accountability.

8. Provides you with an early warning for potential problems – When you budget and take a “big picture” view, you will see potential money problems in advance, and be able to make adjustments before the problem appears.

9. Helps you determine if you can take debt and how much – Taking debt is not necessarily a bad thing if the debt is necessary or you can afford it. Budgeting shows you how much a debt load you can realistically take without being stressed or if taking the debt load is worth it.

10. Enables you to produce extra money – In budgeting, you get to identify and eliminate unnecessary spending like late fees, penalties and interests. These seemingly small saving can add up over time.

But however,most people realize the importance of establishing and sticking to a household budget. This is the best way to make sure that household expenditures don’t exceed income during the month, forcing families and individuals to have to borrow money or use credit cards in order to make ends meet.
The same principles apply to managing business finances. It’s critical that executives work together with other key members of the management team to create a business budget that defines the company’s basic financial structure and how cash will be managed to work within this structure. Business budgeting helps reduce the uncertainty that often accompanies expense and cash flow forecasting, providing executives with a fiscal framework for all of the company’s financial decisions.
Budget Annually, Review Periodically Ideally, the business budget should be created on an annual basis for the upcoming year, and then reviewed periodically throughout the year to compare actual results with budgeted amounts. The two key components of a budget are income and expenses. Income, of course, will be determined by sales volume, which makes the sales forecast a critical budgeting component.
The sales forecast — Start by looking back at your sales from the previous year. Based on economic and market conditions, your product and service mix, and your planned sales and marketing efforts, do you expect sales to be higher or lower in the coming year? By what percentage do you expect sales to rise or fall? And do sales tend to be cyclical or seasonal, or are they spread out fairly evenly over the year?
The cash flow forecast — Based on the answers to these questions, the next step is to project your company’s income (or cash flow) for each month of the upcoming year. This is critical, because sales and income are two different things. If your company offers 30-day vendor terms, for example, sales made in March should become income in April.
On the other side of the ledger are your business expenses, which fall into two broad categories: fixed and variable expenses:
Fixed expenses — Often referred to as overhead, these include things like rent or mortgage, utilities, payroll and other selling, general and administrative (or SG&A) expenses. These should be fairly consistent from one month to the next, regardless of the level of your sales volume.
Variable expenses — These expenses will fluctuate from month to month based on your volume of sales. Inventory and raw materials, for example, are a large variable expense for manufacturing companies — the higher the sales volume, the more inventory and raw materials will be required to fill orders.

In addition to fixed and variable expenses are one-time capital expenditures (or CAPEX) for fixed assets like machinery and equipment, computers, plant and property, and buildings and warehouses. These expenses should be planned for in a separate CAPEX budget which details anticipated CAPEX needs for the upcoming year and how they will be financed (internally or via a loan or lease).
Finally, be sure to factor marketing and advertising expenses into your budget. Ideally, your business will budget a fixed amount of money for marketing and advertising campaigns for the entire year. Depending on how and when this money will actually be spent, you can allocate it as an expense in certain months or just divide the total by 12 and allocate the same expense to each month.
With these figures in hand, you can now create your annual business budget. There are many software programs available into which you can plug in the numbers, or you can simply use a common spreadsheet tool like Excel.
Benefits of Budgeting Taking the time to create a business budget may offer many potential benefits to your company, including these four:
1. You can predict when cash shortfalls may occur, enabling you to plan in advance whether you will need to secure financing, tap into a line of credit or make adjustments to your payables schedule.
2. You can plan large expenditures (including CAPEX) more strategically, rather than being caught unprepared when these needs arise.
3. You can reduce interest expense by planning financing needs well in advance.
4. You will have a better handle on your cash flow, which will increase your overall financial control.