Is budgeting in today's economy different from budgeting at other
times? It isn't; but the state of global economies today will
exacerbate the effects of not budgeting or sloppy budgeting.
What is Budgeting
Budgeting is a four-part continuous process. The foundational parts one and two are difficult to compute: estimating and allocating resources required in a future period to do specific goals. The often neglected but essential parts three and four are barometers for the process: comparing results with the estimate, and taking remedial action as needed.
God alone knows the future; but you need to plan under his guidance to do what he calls you to do. A well thought out budget will help to highlight opportunities and challenges ahead, so you might prepare to deal with them effectively.
Global Economic Overview
According to the National Bureau of Economic Research, the Great Recession started officially in December 2007 and ended in June 2009. Six years later, world economies are anemic; puttering along without signs of a sustainable recovery. Here is an excerpt from the IMF World Economic Outlook 2015:
Canada seems headed for negative to modest growth for a while. Housing markets in Toronto and Vancouver are hugely inflated. The largest province, Ontario, is mired in debt and the liberals continue its spendthrift ways. Recently, Alberta elected a left of centre government whose first act was to raise taxes and inform the oil industry, the province's growth engine, to prepare for higher royalties. Uncertainty in the business community and falling oil prices provide the perfect recipe for decline in Alberta. But more important, the business unfriendly, leftist, Federal New Democratic Party (NDP) is leading in the polls for the upcoming Canadian Federal election, creating even more unpredictability for business investment.
Ten Tips for Budgeting Today
So, what do you need to do for a budget in these times? There are three keys. First, ensure it presents a realistic view of opportunities and challenges that might exist later, so you can evaluate likely responses now. Second, realize that global economies are likely to remain soft, and even when interest rates start creeping up, money will continue to be cheap thereby tempting you to borrow and spend. Third, accept that employment opportunities might be limited as economies stagnate, and so, evaluate your current situation objectively.
That said, these ten tips will guide you to safety as you budget in today's economy under the Lord's direction:
Challenging times lie ahead. Several parameters point to North American and European economies vacillating in a narrow band of negative to modest growth and China growing but at a lower rate.
Like many individuals, you might be overstretched. Maybe you have been borrowing to spend for too long and your day of reckoning is here. Needed lifestyle adjustments will be painful. Look for lessons as you journey, lean on the Lord, and by his grace, you will emerge stronger, wiser, and more contented.
What is Budgeting
Budgeting is a four-part continuous process. The foundational parts one and two are difficult to compute: estimating and allocating resources required in a future period to do specific goals. The often neglected but essential parts three and four are barometers for the process: comparing results with the estimate, and taking remedial action as needed.
God alone knows the future; but you need to plan under his guidance to do what he calls you to do. A well thought out budget will help to highlight opportunities and challenges ahead, so you might prepare to deal with them effectively.
Global Economic Overview
According to the National Bureau of Economic Research, the Great Recession started officially in December 2007 and ended in June 2009. Six years later, world economies are anemic; puttering along without signs of a sustainable recovery. Here is an excerpt from the IMF World Economic Outlook 2015:
Several advanced economies and some emerging markets are still dealing with crisis legacies, including persistent negative output gaps and high private or public debt or both.USA's Gross Domestic Product (GDP) declined in the first quarter of 2015 but recovered in the second. The USA is operating with high public debt, around 100% of GDP, and below potential. Europe is dealing with the effects of Greece's structural issues, among other difficulties in the Eurozone. China is restructuring and its growth is forecast to slow down. Canada, a stalwart that traversed the Great Recession with less ill effects than many advanced countries, just completed two consecutive quarters of negative GDP growth, and technically is in recession.
Canada seems headed for negative to modest growth for a while. Housing markets in Toronto and Vancouver are hugely inflated. The largest province, Ontario, is mired in debt and the liberals continue its spendthrift ways. Recently, Alberta elected a left of centre government whose first act was to raise taxes and inform the oil industry, the province's growth engine, to prepare for higher royalties. Uncertainty in the business community and falling oil prices provide the perfect recipe for decline in Alberta. But more important, the business unfriendly, leftist, Federal New Democratic Party (NDP) is leading in the polls for the upcoming Canadian Federal election, creating even more unpredictability for business investment.
Ten Tips for Budgeting Today
So, what do you need to do for a budget in these times? There are three keys. First, ensure it presents a realistic view of opportunities and challenges that might exist later, so you can evaluate likely responses now. Second, realize that global economies are likely to remain soft, and even when interest rates start creeping up, money will continue to be cheap thereby tempting you to borrow and spend. Third, accept that employment opportunities might be limited as economies stagnate, and so, evaluate your current situation objectively.
That said, these ten tips will guide you to safety as you budget in today's economy under the Lord's direction:
- Fifty percent of the average Canadian and American spending goes to food, clothing, transport, and accommodation. Review spending in these areas over the past six months to see how you might adjust your behaviour to lower future costs.
- For the remaining 50%, find discretionary items and see what behaviour changes you need to lower them. Try to understand your tax situation to determine if you could optimize it within the spirit of the law.
- If you have credit cards, either cut them up, or if you wish to keep them, let them hibernate in a freezer bag in the freezer for the next year.
- Develop clear, complete, concise, computable goals for the budget period, one year ahead. Identify the discretionary component for each goal, and precise commitment dates. For example, if you plan to go to college, show the date of final commitment, date when fees are due, and precise funding source.
- Develop plans for each goal. Plans should be specific, staged (showing individual steps needed to do the goal), simple, and sensitive to your spouse and family's circumstances.
- Decide to spend only after using the Affordability Index. Even so, before you commit, ensure you understand the opportunity cost of doing each goal: If you go to college, what won't you be able to do, and so on?
- Be alert to merchant's seductive advertising through sales, deals, and other sales gimmicks. As well, beware of coupons; use them as currency to pay for needed items. Don't let them drive your spending.
- Develop a contingency plan that you could implement if conditions changed and you needed to adjust behaviour and abandon or suspend certain goals.
- Get an accountability partner to help you stay on track.
- Set up a regular review process to track progress. However, be patient, humble, and depend on the Lord to lead you and guide you to his path.
Challenging times lie ahead. Several parameters point to North American and European economies vacillating in a narrow band of negative to modest growth and China growing but at a lower rate.
Like many individuals, you might be overstretched. Maybe you have been borrowing to spend for too long and your day of reckoning is here. Needed lifestyle adjustments will be painful. Look for lessons as you journey, lean on the Lord, and by his grace, you will emerge stronger, wiser, and more contented.
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