A Comprehensive Budget Analysis

Introduction There are many things in life in which we have no control over, as the increase of market prices for example. Thus the answer to the uncontrolled situations is to be prepared for it: financially. As Suze Orman said: "It's impossible to map out a route to your destination if you don't know where you're starting from." a. What financial tools described in this chapter can help you make better financial decisions? "The budget process is one aspect of personal financial planning, a tool to make better financial decisions." (Siegel, R., & Yacht, C. (2009)) There are, like there is to everything in life, other financial tools that can help. Such as financial statements, risk assessors, time value of money, micro & macroeconomic
What are the components of a comprehensive budget and what is the purpose of each component? A comprehensive budget is a compilation of operating budget and the capital budget financial statements. Together, these cover all aspects of financial life.
An operating budget is a combination of "known expenses, expected future costs, and forecasted income over the course of a year." (What Is an Operating Budget? (n.d.)) It offers business and companies an overview of what their revenues/expenses might be in the future. Therefore, it provides them to prepare ahead of time for upcoming situations. It's also used for personal use, as operating budgets satisfy short-term, lifestyle goals and it aids people in creating free-cash flow that can be used for investment or capital expenditures. On the other hand, Capital budgeting akak investment appraisal "the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash "(Capital budgeting. (n.d.)) But again, capital budgeting can also be used in personal life, as it can be used to record and establish goals for long-term planners. In personal use, it's a process of planning for projects with assets that experience an income of a period greater than one year. And it is an important component of the comprehensive budgeting because it can help make decisions to purchase
How are specialized budgets prepared? What is the relationship of specialized budgets to the comprehensive budget? One can create a budget plan that is specialized on a specific category such as saving for children's college submission. It can be done by segregating it's incomes and expenses from one's comprehensive budget in order to view or maintain a particular asset or of pursuing a particular activity in this case to reflect a more detailed overview. Basically, it's helpful to use a specialized budget to track activities separately that is directly related to another goal. The relationship between specialized budgets and comprehensive budgets is simple, because eventually specialized budgets need to be included in the comprehensive budget to have a complete overview and perspective of one's financial planning.
Conclusion
In conclusion, these tools help establish a stable financial standing as well as help keep track of the personal goals one has in life. As the textbook mentioned: financial planning is a continuous process of making financial decisions. And "The only way you will ever permanently take control of your financial life is to dig deep and fix the root problem." - Suze