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There has never been a more appropriate time to ask yourself “Why budget?” than now. What with the global credit crisis we find ourselves in, the need to be on top of our own financial situation has never been greater.

Anyone who has to be prudent with their money, or who is accountable to someone else in money matters, has the need, and perhaps, the necessity, to budget. But first of all what is budgeting?

A budget is a method of gathering all of your items of expenditure in one place so that you can review the overall situation to establish how much money are going to be needing in the future. The period of time you are budgeting for can be anything from 1 week to several months or even, years. You set your own time period depending on what you are trying to achieve.

The most important thing however, and the importance of this increases with longer terms, is that you need to constantly review your budget to make sure that the figures you are working with are still appropriate. Accuracy is the keyword. Firstly you must include all items of expenditure that you are aware of, but you must also make provision for incidental items that arise from time to time. Always use historical data where you can as a base for your allowances, and best guesses where no other hard information exists. The single most important thing is that you cover everything in one way or another.

The ability to create a reasonably accurate budget forewarns us how much money we need to be earning to cover our forecast expenditure. This is now a very important “tool” particularly in the current global financial crisis. Your budget will forewarn you of any impending problems that are likely to arise whereby you may have insufficient funds either in earnings or savings, or a combination of both, to be able to meet your particular financial demands.

Advance warning puts you in control. Once you are attuned to the fact that there may be money problems looming, at least you can begin to consider ways of averting any crisis. For example you may decide to draw on some of your savings (if you have any), or you may decide to cut out certain “luxury” items, or you may look at ways of increasing your income in some way. But whatever you decide, the budget has done its job. It has alerted you to possible difficulties and got you to think about ways to avoid those difficulties from happening. It has put you in control.