Budget Interview

I was able to interview William Heath, who works in human resources for Goldman Sachs. He is responsible for taking care of international employees, including moving them to and from their destinations. This of course involves working with and managing a budget.

As was expected, it was clear that the most difficult part of budgeting is sticking to it once it is set. Unexpected expenses as well as differences between anticipated and actual costs make this hard. However, there are a few things that can be done to help stay within the budget plan. One thing that can help is budgeting an amount that has no specific purpose except to buffer against these cases. Remaining open to and finding new sources for items and services needed can also help. Sometimes just sticking with the status quo is not the wisest or most prudent route. Another thing that can help from a management perspective is to offer incentives for others to remain within budget. When Will keeps expenses under budget for the year, the remaining amount is added to the bonus pool and divvied out to employees.

When planning a budget, there are "multiple first steps" that need to be taken. First you need to understand how much you are spending during the current year and what the original budget was. This allows you to understand how you are doing with the current budget. The second "first step" is to understand how much of the new budget is already allocated for use. This will help you understand how much budget you will need for the upcoming year. These are both part of the "first step" in planning because both are important and need to be looked at simultaneously in order to create the most accurate budget for the future.

Once the budget is planned, each component of the budget needs to be managed carefully. Fixed costs should be clearly understood and completely accounted for. Once allocation for fix costs have been made, variable expenses can be considered. Often each expense will be spent in several places through multiple businesses  Ensuring that each item in the budget is closely monitored through all of these expenditures will aid in remaining within the set limits. Throughout the process of planning and maintaining a budget, utilizing the previous year as a baseline can be a valuable tool.

When an increase in budget is needed, the reasons must be clear. Whomever is requesting the increase must defend their appeal. After discussions with those who would authorize it, the need can either be confirmed or shown to be unnecessary  Having open conversations and ensuring that a need is real before raising the ceiling on a budget helps to keep costs reasonable and competitive.

In addition to monetary budgets, there are sometimes other resources that need to be budgeted out. One of the things that Will does is look at technology upgrades for software, number of people required to complete the work, and if new relationships with companies are needed to accomplish the work during the year. This requires monetary resources but also allows him to look at work being done and understand how he can more effectively do the required work during the year.

In summary, all budgets are different and usually complicated. By using information from the past and consistently reviewing the current budget, it is possible that budgets can help you manage your money effectively.