Comprehensive Budget

To effectively and efficiently manage one’s economic resources for the long-term, an accurate accounting of the current situation must be realized, and a subsequent plan put in place to achieve the highest and best results possible for the short-term contributing period. To make better financial decisions, there are an array of related tools available. These include budgets and the budget process, variances, financial statements, plus “assessments of risk and the time value of money, macroeconomic indicators, and microeconomic or personal factors” (Siegel & Yacht, 2009, p. 131).

Budgets are money management plans which forecast expected performances of various budgetary items – including income, expense, cash and capital. By precisely

These gaps can be caused by inaccurate budget process or by changes in microeconomic or macroeconomic factors. As variances are identified within the specific line item during periodic updates, these deviations can be analyzed and attributed to errors in the budgetary process or economic changes (micro or macro) influencing the results. Subsequently, corrective action can be taken to realign the forecast with the actual numbers, or some modification to the performance expectations or overall goals can be required (Siegel & Yacht,

For personal finances, the operating budget incorporates income, expenses (soft good consumables), debt payments, as well as savings or investments. Under capital budget, items that are significant purchases and are categorized as capital expenditures, are typically longer-lasting, durable goods. By differentiating these two budgets, one can more precisely monitor and manage monthly finances and related options, which can be substantially varied and distinct from using a simple average, uniformly spreading incomes and expenses across the financial period (Siegel & Yacht,