cause and effect of making a personal budget

Because financial obligations do not decline in proportion to population loss, communities with declining populations have difficulty reducing spending. As population increases and fixed costs are divided among more households, the resulting economies of scale will mean lower per-unit costs.

Social and Demographic ChangeĬhanges in three social and demographic factors – population, age distribution, and personal income – have significant and lasting effects on local budgets. Such action reduces taxes on residents while allowing service levels to be maintained. You can prepare for economic influences by (1) prohibiting departments from spending all their allocations, holding back on permission to hire new staff or make other contractual commitments, building reserves or rainy day funds and (2) obtaining a competitive advantage over other jurisdictions is to export the tax burden, lifting it from residents to nonresidents. Read 'Rethinking Budgeting: Are We Ready for a New Approach?' » Because it affects taxation decisions, competition among local governments for new residents or business investment also exerts an economic influence on local budgeting. Changes in interest rates can also affect the budget, although their effects are not as great at the local level as they are at the national level, where the federal deficit requires continual borrowing. When the cost of living increases rapidly, organized labor experts pressure to keep wages current with inflation. Inflation creates uncertainty in local government revenue and expenditure forecasts. Second, during a recession, state and federal revenues are often hit hard, which means that intergovernmental aid to local governments may decline. First, revenues may decline, especially such revenue as sales or income taxes, which are more sensitive to economic cycles.

Economic downturns affect local budgets in two main ways. Types of citizen involvement to obtain citizen feedback:Ī number of factors can influence the economic environment of local government budgeting, including: And given the powerful differences in service preferences that have been documented among age groups, we should also anticipate further segmentation of communities along generational lines. In fact, we should anticipate greater diversity among local governments in type and quality of services provided, particularly as communities develop reputations for having strengths in particular services. Read 'How Public Engagement Produces More Accountable and Effective Government' » Such a transformation will have a major effect on budget allocations and the relative size of city and county agencies. What appears to be occurring at the local level is that city and county managers and their legislative boards are increasingly using the budget to better understand how citizens, rather than internal participants, see government. Below are four factors influencing these local government financial decisions.

Even more so as local budgets are extremely sensitive to their political, economic, social, and legal environments. As stated in chapter one of A Budgeting Guide for Local Government, navigating the increasingly complex crosscurrents of local government finance has become an essential skill for today’s public administrator.

Cause and effect of making a personal budget