Unlike what most people wanted, the supply of cash and funds in this world is limited. So, in order to avoid the risk of bankruptcy or being penniless, families must be able to budget their money for their utmost survival in everyday life. Budgeting, though not an easy venture at all, is a necessary evil to deal with the practicalities of your spending. One must be able to know how to budget to make sure that your money goes where you want it exactly to be used for.
Whether you come from a wealthy family or a poor one, you must be careful of how you manage your financial resources. Overspending will get into debt to bankruptcy if you don’t watch the status of your expenses. The best possible way to avoid this problem is to resist the temptation of buying for luxury rather than necessity.
Do it as a family
The best way to budgeting is collective security of your finances. As such, everyone in the family must have a part in the decision-making process of the budget – with the parents as the arbitrators of the budget to all members in the family. In contrast to individual budgeting, family budgeting is better because the financial plan of the family is more organized and clearer for all members to know where and how they can get their shares in the family’s budget. Each one’s needs and wants should be evaluated based on prioritization. Thus, there is lesser likelihood of misdirected spending due to sloppy planning of financial expenditures.
The following are steps in creating a family budget that any family can work with, depending on the situation.
- Evaluate how you are currently spending your finances.
Check your purchases, withdrawals, deposits, and everything about finances that goes in between. Observe the stability of your financial resources so that you can analyze how you will plan your family budget. By doing this, you can find out how much the family needs to change your system of spending money.
- Set concrete goals.
Whatever you want to be your goal – whether a dream house, car or a completed education for all members of the family, etc. – treat these goals as your motivation to be able to discipline your spending habits. Always think of this goal when you act upon your family budget.
- Segregate your expenses by nature of their priorities.
Differentiate your expenses from fixed – basic necessities such as food, house and monthly bills (i.e. electricity, water, television, etc.), education – to being optional or discretional. Remember to set aside a considerable amount for leisure of the whole family.
- Pay off debts, as soon as possible.
To make your budget more workable in your condition, always allot money to pay on or before the due dates of your credit. As a family, help one another in solving the problem of debt – whether it’s about credit card bills, student loans or other forms of debt – and work together so that you will have less problems of being indebted in the future. Consult good credit counseling agencies for advice on digging your way out of credit.
- Allot each member of the family their own part in the finances.
This is an important step in the process of making a budget to make everyone in the family involved and concerned about the money that they have. For children, this is a good way to start teaching about spending money and making their own budget of individual expenses. Also, such experience will better equip them for the real world once they decide to leave the home.
Set aside a good part of your family income (some 10% to 30%) so that you can have funds to deposit in the bank. Diligently set aside such amount in order to guarantee sufficiency of resources.
Family budgeting is not easy but when all members work together, they will be able to create a compatible system of using financial resources better and more effectively.