Chapter 5 Of The Textbook, Personal Finance, By Siegel And Yacht, Deals With Financial Budgets

717 Words Sep 29th, 2016 3 Pages
Chapter 5 of the textbook, Personal Finance by Siegel and Yacht, deals with financial budgets (2009). It sheds the light on three types of budgets: the comprehensive budget, the cash flow budget, and other specialized budgets. Each budget is useful in a specific context and they are all helpful to make better financial decisions.
b. What are the components of a comprehensive budget and what is the purpose of each component? A comprehensive budget, which is a “budget covering all aspects of financial life […] includes a projection of recurring incomes and expenses and of nonrecurring expenditures.”
(Siegel & Yacht, 2009, p. 92). A comprehensive budget consists therefore of two large components: the operating budget and the capital budget. Explored separately, the operating budget is a forecast of “recurring incomes such as wages, interest, or dividends,” along with expenses such as “living expense, loan repayments, regular savings, or investment deposits.”
(Siegel & Yacht, 2009, p. 92). The operating budget embraces short-term spans because recurring income and expenses do take place repeatedly over a short period of time. The capital budget, on the other hand, is reserved for nonrecurring items which revolve around capital improvements (getting a new roof, purchasing durable items, etc…) (Siegel & Yacht,
2009, p. 92). The capital budget is usually connected with long-term financial goals and spans over a long period of time (Siegel & Yacht, 2009, p. 92).

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