Creating a Comprehensive Budget

Seeing the value of reaching a goal is often much easier than seeing a way to reach that goal. People often resolve to somehow improve themselves or their lives. While they do not lack sincerity, determination, or effort, they nevertheless fall short of want of a plan, a map, a picture of why and how to get from here to there.

Pro forma financial statements look at the potential results of financial decisions. They can also be used as a tool to plan for certain results. When projected in the form of a budget, a projection of the financial requirements and consequences of a plan, tables become not only an estimated result but also an actual strategy or plan, a map illustrating a path to achieve a goal. Later, when you compare actual results to the original plan, you can see how shortfalls or successes can point to future strategies.

Budgets are usually created with a specific goal in mind: to cut living expenses, to increase savings, or to save for a specific purpose, such as education or retirement. While the need to do such things may be brought into sharper focus by the financial statements, the budget provides an actual plan for doing so. It is more a document of action than of reflection.

As such, a budget is meant to be dynamic, a reconciliation of "facts on the ground" and "castles in the air." While financial statements are summaries of historical reality – that is, of all that has already happened and is "sunk" – budgets reflect the current realities that define one's next choices. A budget should never be merely followed but constantly revised to reflect new information.

Elder Rose Bird's mother taught her how to budget to reconcile "facts on the ground" and "castles in the air." When she was living on her own in Prince Albert, Saskatchewan, her mother came over from North Battleford, Saskatchewan, to visit her. Her mother asked for her money, so Elder Bird put it on the table.

She then grabbed envelopes and asked her daughter how much her rent, utilities, food, and smokes cost her on a monthly basis. She marked a number of envelopes, divided up Elder Bird's money, and put aside an envelope with the appropriate amount inside for each expense. Elder Bird's mother said, "Whatever money you have left, then you can go to bingo." After dealing with the "facts on the ground," namely her monthly expenses, she put aside a bit for the "castles in the air," her wishes, dreams, and goals.

According to the Building Native Communities financial literacy curriculum, written by the First Nations Development Institute (FNDI) and First Nations Oweesta Corporation (FNOC), budgeting and savings have always been critical skills exemplified by First Nations people:

For years, our people have understood and practiced the present-day concepts of budgeting and savings. We managed our resources through conservation so that they lasted throughout the year by saving additional supplies for future use.

Consider the planning done by the Canadian Bands, Nit Nat and Sooke, when they prepared for one of their women to marry. They saved for one year to provide a feast and gifts for all guests at the ceremony. Traditionally, gifts included blankets, canoes, dried fish, and many kinds of animal skins. . . . The wedding ceremony required a lot of preparation and planning.

Our people also saved for the purpose of acquiring goods that we could not produce ourselves. By producing more than the community needed, we had goods to trade. For instance, the Northwest Coastal Indians traded a wide variety of products, including smoked or dried fish and venison, as well as tools made from elk, deer, fish, or other indigenous animals. . . . Our people have successfully practiced resource management skills for generations. Now we call upon their example to strengthen our own abilities.

Elder Florence Allen and Elder Margaret Reynolds also spoke of the budgeting and savings skills demonstrated by their families.

As stated by FNDI and FNOC, budgeting and savings are and have always been core skills that allow individuals and families to contribute to the economy and the community. They allow individuals and families to make informed financial decisions that ensure that they are in control of their money and not controlled by it.

As Elder Florence Allen stated, "Money has a purpose, and you are always the boss of it, and it is never the boss of you because if it becomes the boss of you, you become obsessed about it, and you hoard it, and you are not as kind."

Budgeting and savings help you to be the boss of your money; these skills help you to know what is coming, what is going out, and what is available for rainy days. When talking about her parents, Elder Florence Allen said, "They only went as far as the money went. . . . We never suffered because of that. . . . Life is good when you know you can work with that money and not allow that money to take over your life."

Source: Bettina Schneider, https://opentextbooks.uregina.ca/financialempowerment/chapter/chapter-5-financial-plans-budgets/
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