In this blog entry, I would like to have a discussion about the idea of a budget. We all deal with budgets in our everyday life from figuring out how much to spend on lunch for students to making decisions for a corporation for a business employee working in a finance firm. The formal definition of a budget is “one that embraces the impacts of the financial decisions of a firm. Planning which includes showing the effects of planned operations and capital investments on assets, liabilities and equities and cash budgets. So what does this really mean? And this seems to only pertain to a business level.
To put this in simpler terms, a budget deals with how we allocate our resources in an efficient and smart way, simply how much resources (money, capital, equity) we have on hand, and how we are going to use those resources. This includes either to spend the resources or to invest. People may not realize but our daily routine activities deal with the idea of a budget. In my opinion, budgets not only pertain to physical attributes including money, capital, stocks but also our values, ideas opinions and perception in life. Every decision we make in life mostly deals with the idea of making an exchange according to our abilities and how much we are willing and able to spend according to how much money we make. Budgets are like limits because each person has their own values in life and how far they are willing to go in order to take action on something. For example, I am a person that doesn’t get angry easily and it would take a lot for me to throw a tantrum or pick a fight with someone. So if I put in a scale, my tolerability to anger would be 9 out of 10. If someone were to go over that limit to make me angry, I would get really angry and perhaps fight them. In my opinion, budgets doesn’t just pertain to money and investments because our personality traits can be seen a budget too.
Budgets can also be looked at by the idea of preferences. We all have our own preferences according to the budget we have in mind. For example, one prefers to go to Safeway instead of Whole Foods because perhaps their budget is $50 a week on buying groceries and going to Safeway will buy them double the products compared to Whole Foods. We all have a budget on how much we are willing to spend according to how much money we have on hand but preferences are one attribute to our final decision. Some people prefer less of something but better quality but others may prefer more of something but not so good quality. I feel like no matter where we are, we are following a set of rules set by society or the business world. What we learn in school about finance and school are applicable in the real business world and media and social interactions shape the way we view this world.