Budgeting requires dealing with profound uncertainties arising from irregularities and volatility. Building a budget means estimating known risks and then reserving further for the unknown.
Such practice directs you to a process reform as follows:
1. Shift focus to long-term
2. Make decision space for deeper analysis of alternative futures
3. Expand future financial capacity to deal with unforeseen shocks and opportunities
4. Provide rewards or sanctions to those responsible for budget outcomes
Because of the improbability, budgets cannot predict returns for any specific plan; and they need a strategy that maximizes average net returns from such plan (i.e. marketing).
Budgeting should not be approached as solely a unpleasant exercise in slicing a piece of a pie, but as a venue to dream, plan and create a possible future, and convert it into practical decisions like how to achieve such future by giving the protection to the earnings and fulfilled specific ambitions.
How are you practicing your budgeting?
Marcfields - Capital Management 