Category: budget

I am not a big fan of committees. If you think like I do, you probably think that committees (and, even worse “sub-committees”) are necessary, but a necessary evil. As one who is not a fan of red tape, I see most committees as groups where a lot of talking gets done, but very little action happens.

In nearly any government organization, non-profit, or business, there is one committee that people know will be part of the structure of the organization: the budget committee. Since money is necessary to run any of these groups, a budget committee is often appointed (or elected) to handle some of this huge task. Lakeshore Payday Loans ExtLoansUSA.

But many people wonder what a budget committee actually does. Rarely, if ever, does that group have the final say on budgetary concerns, so what good are they? Are they really making a budget that will be put into action? Here are some things that a budget committee typically does.

1. Information gathering and funneling.

This may be the most important work of the committee, because it not only saves work for the others in the organization, but it obviously helps the committee with the rest of its work. Depending on the organization, most budget committees have access to documents and information sooner than others in the system. Assuming, they have a “financial mind,” they can make sense of this mountain of information more quickly than others. Then they can then put that information in terms that others can more easily digest.

So the committee becomes a sort of funnel, but the top of that funnel is the most important part. The gathering of information is vital to their business.

2. Projecting.

Taking that data, then, the committee often spends time projecting into the future in areas requested by the organization. For a business, they might try to project whether there is enough profit to consider a new franchise or a relocation. For a non-profit, they might try to project whether the level of private funding will rise or fall based upon the information they have. These are not declarations nor decisions, they are simply informed projections to help others in the organization make more informed choices.

3. Allocation suggestions.

Also based upon the information gathered, many budget committees look at the organization from a 50,000 foot view, and try to analyze the finances in a pie chart format. Sometimes, in the day-in-and-day-out running of a business, the leaders lose sight of the overall picture. They might be borrowing just a bit too much, or they might not be allocating enough to future projects.

A budget committee can see the total and raw numbers and help suggest an allocation of funds that will be not only best for the bottom line, but also best in keeping with the overall mission of the organization. A good budget committee will keep both of these clearly in mind.

4. Warnings.

This is often the only time we hear of budget committees, but it is one of their primary functions. Those who have this information and expertise are often the workers who must sound a warning. Maybe the local municipality is not paying employees at a competitive rate. Maybe the business is spending far too much inefficiently and it is endangering the bottom line. Maybe the non-profit is getting a bit too greedy and is losing sight of its overall mission. The committee can spell out these warnings using raw data, but also in language that is clear and concise.

Overall, the budget committee is necessary, so long as they know their true function and stay within those parameters. They must understand that they are not to make final decisions, but they should be allowed the leverage to make strong recommendations, even if those recommendations are seen as negative. The work done by the committee should provide others – especially leaders – in the organization more time to do other work, and those on the committee should always be available to answer questions or clear up disputes or struggles.

Committees should know their intended purpose and focus on doing their job well so that leaders can make appropriate decisions. As long as they’re doing that, I suppose they’re alright.…

I’m currently reading Stay Mad for Life, the latest offering from CNBC and TheStreet.com money manager, Jim Cramer. By the way, I personally think this is Cramer’s best work as it focuses on all areas of personal finance, not just stock picking. I’m not a huge fan of Cramer the television personlity, but this book is pretty good.

In the early chapters of his book, Cramer discusses a unique way of budgeting that carries monthly expenses out to yearly outlays. It got me to thinking. My wife and I are big soft drink drinkers. Besides them not being healthy, I wondered in what other ways these things were affecting our lives.

$360 A YEAR ON COCAL COLA

In a given week we probably go through 2 twelve-packs of Coca Cola (or Diet Coke, depending on how good we are being, or not being). Our local grocery store generally offers a 3/$10 deal making these close to $3.50 each with sales tax. That comes out to $7.00 a week on soft drinks. Convert that to a 52-week, annualized expense and it comes out to about $360 a year for our family budget’s food category. That is nearly a dollar a day!

Over the next couple days my wife and I plan to take a look at our family budget and annualize all our expenses to determine what’s costing us the most over the course of a year (can you imagine what the cable bill looks like…yikes!).

By magnifying these monthly household expenses by 12 it really helps to illuminate those categories of the budget that need to be trimmed. Over time, we plan to create family budget spreadsheet to track all of these expenses (we already budget cash expenditures each month using Mvelopes – an online envelope budgeting system), and I’ll now have an “annual” column to calculate as well.…