Question

Ask a friend or family member if they think people that prepare personal financial budgets are more or less likely to be in debt and why. Then ask the same or another person why they think many people do not prepare a personal financial budget. Share their answers and explain if you agree or do not agree with them (do not mention their names).

Answer 1

Solution:

Reasons why my friends and family member think that people with the personal financial budget is less likely to in debt because

1. The budget helps them to regulate their expense

2. Helps to identify the period where they have extra cash and deficit cash. These people manage wisely to utilize the funds. So that they will never run out of cash

3. Helps to save some amount for the future also.

4. The budget helps to keep you on your financial goal and act as an indicator if you overspend in a month.

5. Helps to avoid debt as the person will stick to his/her budget planned less exceptional conditions encountered. As the budget is prepared on the basis of past experiences this will help persons to get better in financial management skills.

People Do not prepare a personal financial budget because

1. Time-consuming

2. Inaccuracy and less effective budget as budget are based on assumption and which can change without any pre-warning. Hence preparing budget does not work always

3. budget limits you spend which can sometimes prove to be less advantageous

4. Budget is prepared for a family or more than one person combined basis. If, then the outcome is not favorable responsibility fixing is difficult.

5. Budget need required frequent update based on the changed priority of the persons involved.

Conclusion:

I agree, The budget preparation is definitely provided better control over personal finance. The advantage overweighs the shortcoming of the budget.

Note:

In order to effectively utilize the budget as a tool one must make sure that there should be sufficient flexibility to overcome any kind of exceptional change in the conditions or assumptions based upon which budget is prepared.