Sample Research Paper on Determining Causes and Effects


A personal budget is a financial statement that administers future individual incomes towards writing off debts, investments, and expenses (Joo, 2008). Such a budget helps individuals to spend money in a competent and cost-effective manner in solving personal obligations. Money is very essential in our lives and hence not budgeting deters us from accomplishing goals, given that much of it goes to waste. As such, the ability to manage personal incomes is the key to financial independence and warrant for a better life free from crippling debt burdens. This independence can be attained by constantly preparing a personal budget, which helps an individual to determine how much to spend based on need and ability. However, a good number of people do not keep a personal budget; they live a financially strained life. A personal budget enables people to save sufficient money in readiness for any emerging need (Littlechild, 2009). On this note, individuals lacking personal budgets find it difficult to manage incomes, thus causing social and economic problems. This paper talks about personal budgeting as well as the causes and consequences of non-maintenance of a sound plan.


The aspect of personal budgeting is very critical in ensuring a successful society. This is because personal budgets support financial stability, which extends to the society in terms of quality thinking and development. Budgeting presents individual spending habits and provides a platform to determine areas that require more attention in terms of financing as well as emergency planning. In reality, most people do not keep track of their expenses, mostly spending money on unnecessary items that otherwise could be delayed in support of beneficial options. The problem is that most people hold the thinking that personal finances only influence individual budgets and have no negative effects on the economy. This ideology is motivated by the lack of financial knowledge, which really contributes to the ineffective financial controls (Mandell & Klein, 2007). As such, ignorance on the part of the people has made them not to keep a personal budget necessary in ensuring quality fund management. This may be because most individuals lack the desire or skill to distribute funds on assorted projects.

The second major cause is the general fulfillment of sentiment that makes people comfortable with the current situation (Littlechild, 2009). This is induced by the fact that most people in the middle-income groups believe they cannot earn enough to spend and save all at once. As such, they spend all their earnings with the most basic needs, giving less priority to any probable misfortunes that would require them to redirect funds. In addition, most individuals enjoy job security and thus they do not see the need to save much. In this case, no one thinks an income distribution tool would make any difference in life, hence the non-budgeting trend. The vicious cycle has contributed greatly to this trend since the society lacks quality information on personal budgeting, investment, and emergency planning. This has contributed to stressful, frustrating, and pitiful living standards (Joo, 2008).

The consequences of not maintaining a personal budget are life threatening. This is best understood by aging people who realize that financial stability is a necessity if they were to live a healthy life. As such, financial stability signifies that an individual is capable of achieving personal goals such as healthy relations and financial freedom. In this case, the lack of a financial plan is a collective concern, which contributes to non-settlement of bills on due dates and poor credit management. A poor credit score makes it difficult for an individual to secure loans from entities, hence making the issue a socioeconomic problem. A household with two sources of income should manage a budget through excellent communication skills that allow members to evaluate needs and align them according to the desired outcomes (Littlechild, 2009). This restrains one member of the family from spending excessively on items that does not bring mutual benefits, hence building a good relationship. On this understanding, a member keeps off any course of action that would increase financial strain. When a personal budget is not maintained, there are serious financial burdens that result in loss of trust between family members. The loss of trust might lead to divorce, separations, depression, or else high blood pressure.

The lack of a personal budget weakens an individuals’ prosperity. This is because huge sums of money are spent on stupid stuff that do not successfully solve human problems or else generate income. A society in which people are not able to buy food, pay off bills, and engage in income generating programs suffers from regular economic downturns. Non-keeping of a personal budget leads to financial strains at an individual level, which extend to the economy in terms of poor social welfare. This has an influence on the interest rate, which is defined by economic power in terms of individuals’ ability to save as well as seek funding. As such, the lack of proper financial planning negates trade operations, which otherwise impact the national fiscal deficit. Another economic effect is the extent to which money is misappropriated leaving none for investment (Mandell & Klein, 2007). Therefore, if taxes were increased, the disposable income would reduce prompting further personal constraints. This cuts down the demand for commodities, which deters production and economic growth. As a result, the lack of keeping of a personal budget makes it difficult for people to keep track of their expenses and hence make quality financial decisions.


A personal budget enables people to manage finances effectively and live a quality life. The aspect of living without a budget tends to increase financial instability due to vast unsettled obligations. As such, the lack of a personal budget increases blame, shame, as well as guilty conscience. The only way to warrant a better life with no shame and worries is to keep a personal budget that promises better outcomes if efficiently enforced. The budget acts as a tool to increase an individual’s consciousness on when and how to spend money (Joo, 2008). Therefore, it is difficult to manage finances without a statement highlighting the urgency and magnitude of each expenditure.

A personal budget can be prepared on a spreadsheet, hence providing a well-organized financial management tool. As such, persons who do not keep a personal budget find it hard to control their spending; hence, they cannot meet financial obligations and as a result live a stressful life. In large financial institutions, there is a need to keep track of the customer spending habits and advise accordingly on ways and means to improve on personal financial management. One way to improve financial status is to formulate budgets guiding customers on how to spend wisely (Mandell & Klein, 2007). Thus, personal budgets allow people to boost their lives besides promoting socioeconomic developments.


Joo, S. (2008). Personal financial wellness. In Handbook of consumer finance research (pp. 21-33). New York: Springer.

Littlechild, R. (2009). Direct payments and personal budgets: putting personalisation into practice. United Kingdom: Policy Press.

Mandell, L., & Klein, L. S. (2007). Motivation and financial literacy. Financial Services Review16(2), 105.