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Balance


Politicians love the idea of a balanced budget, but anyone who has studied basic book keeping will recognise that the balance sheet is made up of debits and credits. The primary role of a good bookkeeper is to ensure that debits equal credits – that’s why it’s called a balance sheet.

At University in the 1950’s I was taught about balance sheets reporting the difference between what you own and what you owe. “Nett wealth” is the difference and if assets minus liabilities gives you a negative result you will need to do something about it so that you can sleep at night.

In political terms a “balanced budget” has come to mean a situation where income received by the Government is sufficient to meet all planned expenditure.

In domestic terms, either for individuals or a business, a balanced budget should result, at the worst, in having outgoings not exceeding income.

If that is not the case the result is debt. If this is the case you must ensure that the debt is “manageable”, which means “affordable”, which means “payable as and when due”.

Please keep all your debts manageable.