The Pros and Cons of a Balanced Budget

by Wanda Thibodeaux ; Updated July 27, 2017

Both individuals and companies routinely track their expenditures and income, creating and maintaining a working budget. The idea in doing this is that tracking funds directly impacts how well you or a business can plan for necessities and projects, thereby influencing both reputation and financial stability. However, there are both benefits and drawbacks to keeping a budget balanced.

Accurate Predictions for the Future

Attempting to maintain a balanced budget requires accurate data about your expenditures and income, because balancing may require tracking funds to the penny. Even if the budget ends up unbalanced, the data collected in the attempt to balance still is useful for making accurate predictions about what course to take in the future. For example, if precise calculations indicate that you need $50 a week for groceries and you know from receipts that you consistently spend $60, then you know you need to come up with another $10 or decrease your grocery spending.

Time and Resources

Balancing a budget takes time, and in some cases, other resources like money. For instance, individuals have to pour over receipts, and businesses have to compensate employees for the time they spend in budget meetings. If more than one person is involved in the budget, balancing becomes more complex and resource-intensive because not everyone will agree on where to get new funds or what budget items to cut. An example of this on a large scale is balancing the United States' budget, where millions of people are involved.

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Mindfulness of Spending

When balancing a budget is not a priority, it is possible to lose a sense of where spending should stop, because you do not have a precise dollar figure for your available assets. Conversely, if you balance the budget, you know exactly what you can afford and can be more mindful of your spending.

Cutting of Programs or General Expenditures

Sometimes, to get a budget to balance, spending has to be eliminated. On a personal level, this may mean not going as often to the movie theater or out to eat. On the corporate level, this may mean eliminating health care coverage or a specific product model or service. It is difficult to decide what elements to keep covered in a budget and what elements to axe, particularly if each element is similar in costs and has similar popularity rates.

The Bottom Line

In some cases, taking on a debt and having an unbalanced budget may better serve you or a people. For example, the American government is able to provide humanitarian services because it takes out loans from other nations. In other instances, having a balanced budget makes more sense. For instance, if you take out a mortgage with a monthly payment you can't afford, you'll likely lose your house. There cannot be a hard and fast rule about whether a budget always should be perfect, you must weigh the pros and cons for every circumstance.

About the Author

Wanda Thibodeaux is a freelance writer and editor based in Eagan, Minn. She has been published in both print and Web publications and has written on everything from fly fishing to parenting. She currently works through her business website, Takingdictation.com, which functions globally and welcomes new clients.

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