Business & Finance Personal Finance

What Might Impact Budget Decisions?

    Changes in Income

    • One factor that can impact budget decisions is shifts income or revenue received. If you get a raise and suddenly begin earning $200 more a week, you might decide to allocate more money toward certain expenses in your budget. For instance, you might allocate $50 more to entertainment and $100 more to savings. Similarly, if a company suddenly experiences a jump in sales, it might have more money available to allocate to pursuing research and development or advertising. On the other hand, if income declines, a company might be forced to cut expenses. A recession that hurts sales could prompt a company to lay off workers in order to cut labor expenses from the budget to maintain profitability.

    Priorities

    • Another factor that can influence budget decisions is the priorities of the individuals making the budget decisions. The CEO of a certain company might feel that a strong advertising campaign for existing products is the best way to increase sales and devote a large portion of income toward marketing. If a new CEO takes over, he might decide to allocate more funds to creating new products instead of advertising existing products. Similarly, a person that allocates $200 a month to eating out might instead decide to allocate $100 of that to a gym membership if he decides to prioritize fitness.

    Political Pressure

    • Political pressures can have a significant impact on government budget decisions. For example, if the constituents of a certain politician support defense spending, he might vote in favor of budget legislation that allocates more money to defense. If a politician's part is largely in favor of a certain budget decision, he might feel pressured to vote with them, even if he doesn't agree with the decision on a personal level.

    Unexpected Events

    • Unanticipated events can have a large impact on budget decisions. The emergence of a new expense, such as a traffic ticket, might force you to change how you allocate your income. At the government level, events like wars and natural disasters may prompt sudden changes in expenditure.

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