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What Is the Connection between Financial Management and Budgeting?

Article Details
  • Written By: B. Miller
  • Edited By: Andrew Jones
  • Last Modified Date: 20 April 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Financial management and budgeting go hand in hand. People who are able to make a budget and then stick to it, whether it is a budget for home or business use, tend to have much better financial management. There are a number of different methods for budgeting and managing finances, and each person may need to try a few different ones to see what works best. For people interested in financial management and budgeting, but aren't sure where to begin, there are a number of classes offered in this topic, as well as books or free websites available with helpful advice.

For most people, financial management and budgeting begin when they realize they need to make a change in their money management habits. This may occur after a significant life change such as a job loss, or after incurring some debt. Many people begin by simply keeping track of their buying habits for a period of time, such as a month, and seeing where their money goes. This can provide initial clues as to areas to cut back and spend less, and how to begin making a budget to live within their means.

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Often, another connection between financial management and budgeting is that starting with a basic budget can lead to better financial management in all areas of life. Sticking to a budget each month can help individuals begin to pay down their debts, which may inspire additional goal setting. Individuals may then decide that they want to make investments or begin saving for retirement, two other aspects of positive financial management. Some people find that meeting a financial advisor is helpful when they get to this point of financial management and budgeting, and want to begin planning for the long term.

Businesses, from small community businesses to large corporations, also need to keep financial management and budgeting at the forefront of all business practices. Many businesses owners will develop a business plan for the year, showing the expenses they anticipate having, and the expected profits. As the year goes on, this financial management plan or budget may be adjusted based on changes in expenses or profits, and regular meetings may be held to discuss techniques for staying in the budget with employees. Planning financial management goals in advance is one of the best ways to stay within a budget and ensure that a business is profitable.

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