Why Do We Need a Balanced Budget?


The term "balanced budget" is usually used in context with government budgets, but can also be applied to businesses, families and individuals. Whether it be a household's monthly budget or the federal government's annual budget, keeping it balanced is important to keep track of finances. A budget is balanced when expenses do not exceed revenue.

Spending Limits

  • Creating a budget is a good way to see how much a person, organization or government body is spending in comparison to how much money is earned or generated. A balanced budget will guard against spending more than a person, or organization, has available. This creates a limit on the amount of money in certain areas and overall.

No Debt

  • Not having expenditures exceed income ensures that there is no accumulated debt. Debts and deficits, however, are common for many levels of governments. For example, the U.S. national debt is over $14 trillion, as of early 2011. If Washington produces a balanced budget for 2011, no more money would be added to that amount. A surplus, when revenue exceeds spending, is often used by governments to pay down debt.

Fiscal Responsibility

  • A balanced budget is fiscally responsible, which is important to governments and publicly owned institutions. This is because these organizations are responsible to taxpayers, who will question the use of tax dollars. A balanced budget means the government is not taking on more debt and taxation levels

Economic Growth

  • Economies can grow faster when government budgets are balanced. It is believed that a balanced budget results in lower interest rates and increased investment and savings. When facing budget deficits, debts grow. In order to pay off or lower debt levels, governments will be forced to eventually produce surplus budgets. While some may be able to increase government revenue in other ways, others will be forced to increase taxes or cut spending on government services.

Related Searches


Promoted By Zergnet


You May Also Like

  • Why Do We Need Accounting?

    Companies of all sizes need to implement a streamlined accounting system in order to accurately record and report business transactions, keep track...

  • Why Do We Need Carbohydrates?

    With so many different medical experts and dieticians, it's sometimes hard to decide what a person should be eating. This argument is...

  • How to Calculate a Compound Interest Investment

    The idea behind compound interest is pretty straightforward. If you are being paid a given interest rate on an investment, and the...

  • How to Make A Balanced Budget

    Creating a budget is the first step to successful money management. Trying to manage your finances without one can lead to stress...

  • Why Businesses Need to Budget

    Running a business requires a great deal of financial acumen, and one of the most important components of business management is budgeting....

  • The Advantages of a Balanced Budget

    Everyone from individual families to the federal government use budgets to track their financial needs and account for revenue and expenditures over...

  • Three Reasons Why You Need a Project Plan

    A project plan is a crucial element of project management, as it defines the project's main objectives regarding collaboration, time constraints and...

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!