As we have conversations in higher education about budgeting, we try to remember to take a step back and recall how regular individuals (not as officers of a college, bound by the many regulations, restrictions, strategic plans, etc.) talk to each other about budget adjustments. Thankfully, a quick online search reveals the simplest home economics example. Here is a summary of the results:
- Involve the entire family. Agree on a budget up front and meet regularly to check your progress.
- Stay disciplined. Try to make budgeting a part of your daily routine.
- Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays.
- Find a budgeting system that fits your needs. (e.g., electronic spreadsheet or physical ledger).
- Distinguish between expenses that are "wants" (e.g., designer shoes) and expenses that are "needs" (e.g., groceries).
- Build rewards into your budget (e.g., eat out every other week) to keep yourself motivated.
- Avoid using credit cards to pay for everyday expenses. It may seem like you're spending less, but your credit card debt will continue to increase.
The results offered suggestions for how to address a fluctuation in income, too. In the event of:
- A windfall, use the money to increase your savings and pay down debt.
- A raise, don’t just absorb it into your spending; apply it to your debts and savings goals (50/50 is a good way to celebrate your hard work while also increasing your financial stability).
- Drowning (in consumer debt, that is), review your input and curb your output.
- Change, don't replace one bad spending habit with another; keep living within your means and keep your bad habits at bay.
- Inflation, when this happens, it’s time for a COLA.
This list is useful in two ways: a) it illustrates what home economists know that each of us should know, and b) a set of common wisdom we should completely ignore when working in business.
The findings also reveal what home economists know that we often forget: a) Involve the entire business in budget planning; b) make budgeting a part of your daily routine; c) budget when it is easy to budget rather than when you run into an emergency; d) find a budgeting system that fits your needs; and e) build rewards into your system.
All of the items above are core to the FundFive philosophy. Budgeting is a culture, not an event. The right tools allow for your business to involve the entire institution in budgeting, and involvement in budgeting allows for personal investment of those who budgeted to stay on budget. Centralizing budget structures may be enticing to business officers, but it generates hundreds of employees who are powerless to move strategically, and it creates a culture of “asking for the moon.”
The most important thing to ignore from home economics wisdom is the relationship between debt and the life of the business. Divide your business life between high and low interest debt. While you should definitely minimize your high interest debt, don’t pay down your low interest debt any faster than you have to pay it. That money, if used to expand business rather than paying bills, will return in multiples of its value as compared to disappearing silently into debt reduction.
- Use your best judgement to follow that which others tell you to be best practices around budgeting and budget adjustments.
- The perfect way to enact budget practices is to make it an institutional culture, not an event.