When you set a spending limit for a project that you are undertaking, it is important that you make every effort to fall within that limit. Whether you are an individual, the accountant for a business, or in a public service role, out-of-control spending will damage your ability to meet your goals effectively and efficiently.
If the task you are undertaking is a small one that doesn't require a bank loan, you will be paying for it out of your own pocket. If you meet with unexpected delays or complications, or simply do a poor job of managing the project, you may find yourself in a position where you need to borrow money. Once you have done this, you then have obligations to a lending institution and interest that needs to be paid, and the cost of your project has just gone up substantially. Managing your project carefully so that it remains within financial guidelines can avoid this unwelcomed spike in costs.
Larger projects, whether they are a major home renovation or the production of a film, are probably going to require a bank loan unless you have large savings. There is nothing wrong with this as long as you budget for it to begin with and are confident that you can meet the costs that are associated with the loan. Staying within your budget is just as important as any other situation, in order to ensure that you can meet your payments and fulfill your obligation to the bank. Failing to do this could lead to fines, penalties and eventually foreclosure if you default on the loan.
An individual's personal and financial reputation can be damaged by involvement in a project that goes over budget or is otherwise financially sub-standard. This can happen in any number of different fields and situations. If you have made an agreement with someone to do a job for a fixed price, it is bad practice to subsequently ask for more money. If you go over your budget, you are left with the unpleasant choice of alienating your client by asking for further payment, or working for little or nothing by completing the project for the original fee.
Contractors or workers who are undertaking a project and are pressing up against its financial limitations will be under pressure from their clients, their investors and themselves to cut corners in order to keep costs down. This can easily compromise the quality of any project. It's better to proffer a high bid to begin with, knowing that you can do a superior job within its parameters, than to make a low bid and then have to do a mediocre job to stay within a budget that is too small.
Jagg Xaxx has been writing since 1983. His primary areas of writing include surrealism, Buddhist iconography and environmental issues. Xaxx worked as a cabinetmaker for 12 years, as well as building and renovating several houses. Xaxx holds a Doctor of Philosophy in art history from the University of Manchester in the U.K.