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disadvantages of fixed budget

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked about 3 years ago

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7 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Ashika answered almost 3 years ago

Disadvantage of Fixed Budget One problem with static budgeting is that it does not account for life's unpredictable events. While fixed bills, such as mortgages or car payments, are easy to predict, variable expenses are unpredictable. As a result, exceeding your budget will cause stress. Static budgets also are not an accurate way to track expenses. In fact, all they do is provide a basic guideline that will be difficult to follow, should your income or expenses change. Thanks

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

One problem with static budgeting is that it does not account for life's unpredictable events. While fixed bills, such as mortgages or car payments, are easy to predict, variable expenses are unpredictable. As a result, exceeding your budget will cause stress. Static budgets also are not an accurate way to track expenses. In fact, all they do is provide a basic guideline that will be difficult to follow, should your income or expenses change. Alternative If you find that a static budget does not work for you, consider a different approach. If you abandon a static budget in favor of a more flexible one, not only will it put your mind at ease, but you may notice that your spending is not as excessive as you think. Rather than allocating $200 a month for groceries, monitor your expenses over several months. For instance, assume that you spend $220, $170, $150 and $250 on food in June, July, August and September, respectively. Notice that you sometimes exceed your ideal budget of $200. However, if you add those numbers and calculate the average expenses, your monthly average is $197.50 -- a few dollars below the limit. Now that you know the average, you can base your budget on that number. Instead of guiding your budget, the budget establishes itself and guides you.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

-One problem with static/ fixed budgeting is that it does not account for life's unpredictable events. While fixed bills, such as mortgages or car payments, are easy to predict, variable expenses are unpredictable. As a result, exceeding your budget will cause stress. -Static budgets also are not an accurate way to track expenses. In fact, all they do is provide a basic guideline that will be difficult to follow, should your income or expenses change. -It is inadequate for control purposes. -It violates logic.i.e when fixed budgets are used budgeted costs at budgeted activity are compared with actual costs at actual activity.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

**DISADVANTAGES OF FIXED BUDGET** It is misleading. A poor performance may remain undetected and a good performance may go unrealized. It is inadequate for control purposes. It violates logic.i.e when fixed budgets are used budgeted costs at budgeted activity are compared with actual costs at actual activity. Thanks

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Data?1494421730 rohit awasthi answered about 3 years ago

Hii Uma > Disadvantage of Fixed Budget FIXED BUDGET A fixed budget is one that is drafted on the basis of specific criteria without any provision for any changes at any point during the period of time covered by the budget. The budget lets those involved know how much they have to spend during a given time frame, regardless of any eventualities such as a slump in sales or increased profits. Disadvantage Disadvantage of Fixed Budget One problem with static budgeting is that it does not account for life's unpredictable events. While fixed bills, such as mortgages or car payments, are easy to predict, variable expenses are unpredictable. As a result, exceeding your budget will cause stress. Static budgets also are not an accurate way to track expenses. In fact, all they do is provide a basic guideline that will be difficult to follow, should your income or expenses change. Thanks

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Open uri20170510 32134 tcchcu?1494421832 Jitendra Suthar answered about 3 years ago

Hiiii friend.... Disadvantages of Fixed Budget ----------------------------- A fixed budget is a financial plan that does not change through the budget period, irrespective of any changes in actual activity levels experienced. Since most companies experience substantial variations from their expected activity levels over the period encompassed by a budget, the amounts in the budget are likely to diverge from actual results. This divergence is likely to increase over time. The only situations in which a fixed budget is likely to track close to actual results are when: - Costs are largely fixed, so that expenses do not change as revenues fluctuate - The industry is not subject to much change, so that revenues are reasonably predictable - The company is in a monopoly situation, where customers must accept its pricing Most companies use fixed budgets, which means that they routinely deal with large variations between actual and budgeted results. This also tends to cause a lack of reliance by employees on the budget, and in the variances derived from it. Regards,

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Open uri20170510 32134 1nqu8aj?1494421649 sowmya answered about 3 years ago

A fixed budget or static budget is a budget which is normally set prior to the start of an accounting period, and which is not changed in response to changes in activity or costs/revenues. It is produced for a single level of activity, i.e. based on estimated production. Advantages One advantage to static budgeting is that it teaches you to prioritize. You create a clear distinction between the things you need and the things you want. By forcing yourself to remain consistent, it ensures that your bills will be paid on time. Static budgeting can also be beneficial if you regularly spend more than you bring in. It essentially allows you to start living within your means, meaning you spend less than you earn. This is especially helpful if you struggle with debt due to past financial choices. Disadvantages One problem with static budgeting is that it does not account for life's unpredictable events. While fixed bills, such as mortgages or car payments, are easy to predict, variable expenses are unpredictable. As a result, exceeding your budget will cause stress. Static budgets also are not an accurate way to track expenses. In fact, all they do is provide a basic guideline that will be difficult to follow, should your income or expenses change

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