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Fundamentals Of Financial And Comprehensive Budgets

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The financial tools described in this chapter were cash flow budgets, comprehensive budgets, specialized and tax budgets. A cash flow budget helps view your financial history in more detail with more focus on the timing of your cash flows. Comprehensive budgets help you view your whole financial life, like all the projections of your incomes and expenses. Specialized budgets are to help track specific assets or an activity separate from the others but that are ultimately included in your comprehensive budget since it is part of your financial life. And a tax budget is used to track taxable activities. Many other factors like financial history, financial statements, macroeconomic factors, microeconomic factors and personal factors are also tools used to make better financial decisions. For example, the chapter outlines health, family …show more content…

The purpose of both is to understand and create projections that distinguish your income, expenses, investments and goals in the long and short terms. Operating budget accounts for your short-term goals, paying off recurring expenses like a car loan, living expenses, etc. It also lists income annuity and other recurring incomes with a goal of creating free cash flow to be used in capital expenditures, that's where capital budgets come in. Capital budget is the long-term side of it, long term goals and nonrecurring expenses and investments. Operating budgets help you see what type of lifestyles would best suit you, while capital budgets help you further plan any specific goals you want to achieve, like paying off student loans or fixing and replacing the motor in your car with a new one. Although both do require a constant reassessment of decisions and include considering financial history, microeconomic and macroeconomic factors to project your choices, a capital budget will always be harder to project for because it involves many future

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