A lot of work goes into making a reasonable budget. You have to think about what you need in relation to how much money you have. You also have to decide how much cash can be saved after all your priorities have been sorted. In addition to this, there are various other factors that you need to consider.

The price of commodities can change and miscellaneous expenses may outweigh your usual rates. Worse still, emergencies may arise, forcing you to dig deeper into your pockets. Such changes can compel you to make adjustments to your budget.

Problems

The same thing applies to organisations like Total Kenya Limited. The company’s operating expenses increased 8.7% to KES 2 billion from KES 1.8 billion for the half year ended June 2012.

The high operating fees, coupled with the rate of inflation caused Total to incur losses worth over KES 259 million. The company also reported an increase in bank borrowing.

Likewise, a personal budget needs to have a backup system in case the money is insufficient. The cost of having lunch at your usual restaurant can become a hassle if they decide to hike their prices. Taking a taxi at night instead of walking home can mean that you won’t be able to afford your fare for the rest of the week. There is always the option of taking a loan from a friend or the bank but this only contributes to your future debt.

Solutions

According to Total Managing Director, Alexis Vovk, the company used proceeds from its share sales to pay off some of its bank loans. He noted that the government has since adopted policies to reduce interest rates as well as control the rate of inflation. Total intends to exploit these developments in order to avoid future losses.

If you need to supplement your personal budget, then you can sell some of the items you own the same way Total sold its preference shares. In the case of borrowing, friends can be lenient but interest rates make paying bank loans seem a little bit more difficult . In such cases, the reduced lending rate can be used to the borrower’s advantage. For other expenses like food and transport, you can always choose less expensive alternatives.