Steps to Establishing a Budget
To successfully manage your money and establish a budget that you and your family can follow, you need to know the answers to the following:
1. What your total income is;
2. How your money is spent;
2. Where your money is spent;
3. Why your money is spent.
What you will want to focus on are weekly, monthly, and yearly expenses. Based on these expenses, you will then need to determine how to budget your money based on your family’s present and future financial obligations and needs. Basically, you will want to budget your money in such as way as to meet the family’s needs, save money, and avoid long-term debt. Your family’s “needs” should include only those items that are daily necessities and should not include non-essential items at this point.
While non-essential items can be important, they should not be part of your family’s initial budget. Frivolous spending is the archenemy of the family budget and is one of the first areas of spending that your family must get under control immediately. Spending money on non-essential items can have detrimental effects on the family’s financial future. Once the budget is firmly established you will be able to determine if any extra monies remain after bills have been paid and money has been put into savings. If you have money left over at the end of the week, month, or year, then you and your family can decide how this money will be spent. If you have built a satisfactory savings account, have avoided debt, and have met all of your financial responsibilities, then taking the family shopping for non-essential items may be in order.
Expenses to Include in Your Family’s Budget
If you need help determining what essential and non-essential items are when you first begin to create your family’s budget, you may want to begin with bills that you know you have to pay on a weekly, monthly, or yearly basis. These types of expenses are anticipated expenses and may include such things as:
• Mortgage or rent payments
• Credit card payments
• Council Tax
• Groceries
• Utilities (i.e. electricity and water)
• Loans (personal, student, etc)
• Healthcare/Dental care
• Transportation (fuel, repairs, etc)
• Miscellaneous household related expenses (repairs, maintenance, other household goods)
These are expenses with which you will be familiar and have come to expect on a routine basis. You typically know when these bills are due as well as the required minimum payment on such bills. When you have made certain that all of your financial obligations have been met, you can then determine how much “extra” money you have left over. It is usually wise to place a portion of this money into some type of savings account. The amount you save each week, month, or year and the type of savings into which the money is placed will depend on your family’s financial goals. If extra money remains after money has been put into savings, then this money can be used for non-essential items such as fun, leisure, and entertainment.
Tools for Budgeting and Managing Family Finances
Creating and establishing a budget can be complicated and challenging, especially for those that have difficulty with organization, routine, and identifying their family’s priorities. If you have tried to establish a family budget in the past without success then try, try again. There are resources available to help you get organised and to help you get on the right financial path. The internet contains a wealth of information regarding budget planning. There are many online tools available to assist you while you are planning your family’s budget. Budgeting tools that are available via the internet include:
• Downloadable budget planners
• Online budget planners
• Calculators
• Savings planners
• Printable guides for managing money
In addition, there are financial counsellors available at various institutions and organizations that are experts in their field that could assist you and your family with budget and savings plans. You should always remember that you are not alone in this process and that help is available if you need it.
Budgeting Should Not Be All Work and No Play
Even though it is important to meet your financial obligations first and foremost (i.e. bills), it is still important for your family to set aside money to have fun together. There are ways that you can spend less on essential everyday items, such as groceries, in order to free up money for fun, leisure, and entertainment. Using coupons or buying store-brand products are an excellent way to save money on groceries. Re-evaluating your mobile phone plan or bundling television, internet, and phone services can help save your family money. Making sure unused appliances are unplugged and setting your home’s thermostat a few degrees warmer or cooler can help save on energy bills.
Reducing the money you spend on essentials provides your family with the money you need for holiday, going out for pizza on Friday, or buying board games that everyone can enjoy. While spending family time together does not necessarily have to cost money, splurging on family fun every once in a while can be enjoyable and provide you with an opportunity to show your family how important they are to you.