HOW SHOULD A FAMILY BUDGET BE USED

This question immediately suggests that it should be part of the whole family budgeting process. It is much part of the learning around setting it up, considering its usefulness, function and purpose.

Creating or setting up the budget is one thing. Sticking to it, effectively implementing, sustaining and if actual fact, in essence ‘using’ it is the ultimate goal and achievement. That is worth celebrating. Families have different ways again to use or refer to their family budgets.

For some it will be no more than a general guideline. For others it would constitute an absolute rule not to be bent or broken. Others still will use the family budget as a strategic planning tool to protect the interests of his/her family and plan for a full and happy life, setting a small amount aside for the future, invested smartly and securely, with confidence and pride.

The very day the family budget actually assists you in reducing your spending and making informed smart financial decisions that is the day you do not sit back and relax, but throw all your energy back in making it even better. This is an on-going, continuous improvement exercise, experiment and undertaking of your own making, design and creation!

The family budget can:

• Assist you in handling unforeseen increases in costs and unbudgeted expenses

It is very common to get discouraged when on the family budgeting path. The minute you feel you have taken strides forward, something will happen, a setback, unexpected upset or expense, breakdown, maintenance or replacement or car, appliance, major purchase or repair and many other setbacks will occur.

In a sense it makes families more robust, responsive and adaptable. Tracking your finances makes you aware of patterns and business cycles, cost and many other factors that affect hearth and home financial life and health. Rent increases, more expensive cigarettes or tax increases, higher gas or energy prices or increased mileage to and from work are but a few examples of these events and issues that might come up.

When faced with these challenges, problems or complexities, having your fingers on the pulse of your available resources, discretionary monies, savings, line of credit, rates, banking fees and more, will all help you make the right informed decision that is best for your family, at that time and act accordingly with diligence and confidence. You are in control of your financial situation and not the other way around. It enlightens and empowers you to do more with less!

Unpredictable pricing and fluctuating expense are not easy to reduce in any budget. Having this variation handy, spread over a period of time, can help you plan better and anticipate sudden spikes or higher expenditure during certain months of the year.

For example, the telephone bill is higher when the teenagers are home for the summer. Emergency, contingency and improvements are not priorities for most of us when we receive our paycheck. To ensure a steady stream of income into these categories make “saving for a rainy day” come to life and have some real impact and meaning in our financial planning.

Cutting non-essentials first is a good strategy. Alcohol, long distance phone calls, gifts, gardening and landscaping services, decorating costs, pet care needs, recreation and lottery tickets can all be good money-saving categories. The more line items you can include, in your cost reduction, the smaller the dollar-amount impact in each.

It should come as not surprise that by just cutting a little in each of these categories, families can easily save upwards of $240 per year without too much noticeable difference in their lifestyle or any major disruptions or sacrifices. If is less than1 % of your total spending, it should not really cause pain, grief or reason for worry.

Family budgets can also provide hints on how to save on non-essentials: Buying more or less of a product or service, comparison shopping for the lowers possible price, bulk and discount, sale, buying a lower-priced or no-name brand. Eliminating some gift giving (Christmas, birthdays, friends and family) is a way to save money.

Elimination of waste is another clever way to save money that is often overlooked, BUT not in the family budget. Thrown out food because too much was purchased or it spoils because at time of purchase it was not as fresh as it could have been. Spur-of-the-moment clothing purchases, too trendy, uncomfortable and not the right size perhaps?

Making an active effort to participate in the family budgeting process will carry its own rewards as well. Self-discipline and curbing your own spending will soon become second nature almost.

• Enable families to make large spending reductions in the right places at the appropriate times

Anything from a small rent increase of a couple of dollars to an all-out job-loss can impact home life and finances, and not in a positive sense. The family budget offers you the opportunity to prepare somewhat for this, whether pro-active or responsive action follow. Flexibility and adaptability are bonuses with family budgeting.

It will spell out the reality, damage, impact, what needs to be done at the barest of minimums to get by and offer stop-gap solutions, practical and accessible, right away. It is not to say that it will have you not worrying about it! All of us will be concerned if this is our situation, but it will leave you more prepared to deals with the challenges head on and right away as opposed to wasting time wondering what to do and how bad it is.

• Protect against income reduction and inevitabilities

In the case of job loss mentioned above there are also immediate realities to consider. Financial implications are huge for family life and the pressure is on. Family budgets and informed budgeted will tell you that this tool and time spent will be worth every penny if this were ever to happen to them.

Because of the heightened awareness and familiarity with the context and content of the financial, spending and cost cutting plans and strategies, goals and savings, the family budget process and product now offer avenues to solutions rather than barriers of debt and no point of return.

Tackling normal spending categories first, reduced transportation costs, packing a lunch as opposed to having it in the cafeteria every day. Suspend all discretionary funding, move money in your accounts around to ensure liquid assets to cover basic expenses. Luxury items and recreation, sports and other leisure activities will be another category to find some budget dollars.

Maintenance and repair costs might be suspended or delayed, cost-cutting is never pleasant but the budgeting process makes it easier to know where the cushions and ‘fat’ is that can be trimmed or eaten away at, without risking heart and limb!

Other positive job-changes like promotions and relocations could also have a lot of impact. Taxes, relocation fees, buy-and-sell of homes, settling allowances, insurance, storage etc. they all add up. The family budget will help you assess your situation more clearly, leading to better decision-making and informed empowered choice.

Any discussion on ‘How to set up a family budget’, will be incomplete without a section dealing with debt and debt consolidation

Normally we use credit cards for a variety of good reasons, like convenience, business expenses, online commerce, instant accountability, unexpected bargains or expenses, medical and or other emergencies.

There are however, also very definite situations where plunging yourself deeper into debt is not a good idea at all:

An expensive item you know you cannot afford (indulgence shopping). If you do not have the cash funds to purchase it, charging it is not going to make it easier for you to pay it! By putting it on plastic you just racked up the price and interest charges. Your budget will not thank you later for this one. Bad decisions often lead us down the wrong path. You will be left facing paying for this choice for a couple of years down the road still.

Tele shopping or infomercials for gadgets and widgets.

When grocery shopping, pay cash rather than plastic, or you will most likely overspend.

Meals, drinks, nights out and other entertainment charges are all like the miscellaneous category in a budget. The balance and dues will just keep on piling up, if it is not tracked and monitored closely

If you are truly going to be budget-minded and money conscious while trying to get out of debt, consolidating or in debt-repair avoid the plastic!

Check the interest rates on your card, consolidate accounts, go through the exercise of balance transfers et al. and seek the advise of a professional to assist and advise you, on how best to approach credit of any sort while on the mend to financial freedom, reputation, repair and recovery.

For family budgeting purposes, credit cards are for EMERGENCIES ONLY and should not be used to pay for bills or luxury items. Carrying a high balance, missing a payment, paying less than the minimum or other faux pas, might negatively affect your credit rating and undermine all the other good work you were doing in your budgeting process.

Watch out for steeper late charges, higher rates, annual service fees, interest rates and charges, and cash advances.

Using your credit card at an ATM for a cash advance can sometimes not be convenient, as the rate and cash advance fees can total as much as 24% or higher. This is even more than loan sharks or other payday like loan providers.

Do not use credit cards for any of the following reasons: unbudgeted expenses you cannot pay for; having no cash savings to help you with unexpected expenses, consuming more than you can afford or impulse shopping.

Debt management and family budgeting actually fit like hand-in-glove together. They compliment and strengthen each other if used appropriately and with caution, diligence and commitment to change.

It is advisable to get a handle very early on in your budgeting process on what exactly the debt situation is. For most people this is the most painful part of the process. Facing their monetary past and the aftermath of overspending, lack of budgeting and large debt!

Extreme care should be taken early on as well to protect your financial interest. Review your family budget spending categories and avoid debt by every means you can and not use it for living expenses.

Repaying your debt should be the main priority. Consulting with a financial planning and debt consolidation professional and specialist will help you answer the question whether you need to consolidate, transfer, stop using credit cards all together, file for bankruptcy or what your other options are. Exhaust all the possibilities before pursuing this route.

A personal debt review can be painful, but is very necessary to assess the status quo or where you are now and how good or bad it is. What is the depth of your “obligation” category in your budget, where this will inevitably fall.

Debt is a wide concept, covering lots of things, including mortgage, car, credit cards and other retail credit card accounts and personal loans of any kind. IOU’s from family or friends also have to be included, if you are honest about making a difference, repaying in a timely fashion and truly want to know how bad it really is!

Your summary sheet can carry the following headings: account, total amount due, monthly payment, total interest paid last year, and interest rate. Financial advisors call this a debt review register. It is painful to see this data, because it will clearly show the impact of bad financial decision-making. Interest paid gives you absolutely NO BENEFIT WHATSOEVER!

Strategies for debt and cash flow management in a family budget include:

Consolidating all consumer debt (that is everything you owe, except for your mortgage) and making it a priority to pay it off in a timely fashion, getting reduced rates and maximizing your effort in wiping the financial slate clean.

Paying off high-interest credit cards first

Use a line of credit if you can as the interest rates are typically lower

Suspend any kind of spending on any credit card and establish good habits paying in cash for purchases

Use all store-based cards wisely or not at all, if that is the disciplined approach you have chosen

Store-based card often have no annual fees and you could qualify for them even with a low credit score – showing restraint and good fiscal management by making your payments on time, every time and keeping the account up to date, will go a long way to regaining your confidence and repairing your credit.

Utilize the service of a good credit counseling service to assist you and deal with your habitual over-spending and shopping addiction

Use credit card statements for budgeting purposes for accuracy and tracking

Loans are handled no differently – the strategy is pretty much the same: find the highest loan balance and the highest rate and start paying the latter first

Avoid any new debt

If after a six month period you have paid like clockwork, contact your creditors and negotiate a lower rate at that time to ease the burden a little bit

Student and educational loans are approached as investments in your future and is a hybrid and shoulder debt category really. Loan-payback for all tuition debt needs to be included in your family budget. Taking a second job (evenings and weekends might be the answer here, ,while honing and practicing your skills and gaining some more experience as well!). This might lead to better business opportunity later and higher paying jobs later in life!

Take heart. Family budgets are not here to depress you even further. The fact that you are taking pro-active measures to participate in your life, ,sends the right signals, not only to creditors and credit counselors, but also to the family members that care so deeply about you too!

Another popular topic for family budgets, is children and fun activities. How to make the most of these togetherness opportunities, while living and functioning within limited means and on a budget, causes many money wise parents concern:

“The best things in life are FREE” – you just need to know where to find them, how to look and then enjoy them together. Being cash-strapped or budget-challenged should not minimize the FUN you as a family have together.

Prioritize it together with the other members and the children in the home (if they are older), discussing alternatives like picnics, walks, visiting a beach, lake or park close-by.

Look for locations with lots of open-area space, baseball fields, tennis courts, and basketball courts.

Use coupons for entertainment like DVD rentals, miniature golf and other sports.

Matinee rates for movies are a great way to save money.

Play board games with friends, arrange potlucks and play-dates.

Visit zoos and museums and outdoor summer concerts that are usually free of charge.

Add fun elements to choosing, like putting the activities in a hat and letting other choose what to do next.

Avoid window shopping, mall-crawling or expensive shops where you will be tempted to spend more money or leave feeling guilty that you cannot.

For discounted, bargain-priced brand-name kids clothing, shopping at end of season sales is a real budgetary blessing!

Budget for one very special outing or event, you can do as a family and set aside a little extra if you can for that annual camping, local or road trip you plan for, in your family budgeting process each and every year.

Family budgets is not all doom and gloom. There are always ways to do little things together, make memories and invest time and attention in one another that costs absolutely nothing but time, a smile, a hug or two and a caring heart to share them all with!

FINAL THOUGHTS ON SETTING UP A FAMILY BUDGET

None of us want to remain or be without money, short on cash, cash-strapped and not able to live well and or get the things we need, dream about and want. Family budgeting brings us one-step closer to our fiscal realities, while offering more than the direction and route, but also the tools and techniques to get to fiscal nirvana!

Most of us have an inherent want to protect what is rightfully ours. Our hard-earned cash is no exception here. We want to enable, as far as it is in our power, to utilize what little (or much) we do have to the best advantage and our family benefit overall. Family budgeting helps us do so with method, structure, elements and processes that enable success.

Family budgeting can assist have and have nots alike make better financial decisions with a future perspective always in mind.

Building greater awareness of where our money actually goes, or ends up, can be enlightening and empowering at the same time. Some react with shock and horror, as they realize they are their own worst enemy. They bear witness to impulse-driven shopping and periods with no fiscal discipline. Realizing that this course of action hurt you and your family in the long run, puts a sudden halt on the money flowing out typically! (even if the effect does not last too long!)

Although family budgeting can be overwhelming at first, the tools and techniques, process and steps to follow are fairly simple, straightforward and easy. Like so often said, it is not rocket science! We just need to have the right attitude, motivation and persistence to see and follow things through. Budget or bust!

Family budgeting can help you get, be and remain in control of your money and family’s financial situation. Be kind to your pocketbook!

Set aside time to work on your household financials and budgeting processes on a regular basis. Keep it up to date and accurate. This way you can spot problems early, react quickly and come up with creative solutions in the short-term to address any issues, challenges or shortfalls. Be on top of things.

Family budgeting helps you know your own financial facts. You will be able to know, instinctively and exactly what is going on with your cash-balance without even looking at your statement necessarily! A good test to tell whether someone is using a family budget for their household is to have them write down the exact amount they have in the bank today, and as of now also on their person, in their wallet. Add the two and write down the total right now.

What did you learn from this exercise? Let us take it one-step further. What do you owe? Include credit cards, car financing, mortgage and other debt. Subtract what you owe from what you have. Have you learnt anything by doing this simple exercise? For most of us the answers would be astonishing! This hands-on involvement and knowledge about your finances helps some and not others. For some of us just glancing at our statement now and again, having no idea as to what is in our wallets, is quite all-right too. (That is, as long as you are not finding ways to spend it without realizing it!)

In family budgeting, do not be hesitant to set stretch-goals too. Whether you get there by cost cutting, taking a second, part-time or seasonal job or find another source of supplemental income, it helps your raise the bar even higher.

Family budgeting is not just about budgeting to the last cent and flying by the seat of your pants. It offers structure, wisdom, decision making and reward for the serious and tenacious amongst us. Taking it on as a major and regular task and priority will change your quality of life, sometimes without you even realizing it.

You are in it for the long haul! Take responsibility for spending. It this means laying down some ground-rules in your household and cutting back on a couple of luxury items, that needs to be discussed, agreed upon and stuck to, to make your budget work and have an impact over time.

Family budgeting is about minimizing and totally avoiding if possible any unexpected and deemed unnecessary spending. Spell out the realities and consequences of these purchases to others – short on cash, family tension, unnecessary stress and complications, hardship and more. Openly discussing it builds fiscal responsibilities on all fronts. This does not mean rigidity or inflexibility. Need, merit, means and circumstance will obviously dictate.

Family budgeting is also about shared responsibility. All members can participate – even the kids. Taking responsibility for the grocery bill for example. Mom is responsible mainly for the weekly outing to the store, but when it comes to the staples like milk, bread, eggs and cheese, one of the teenagers can be entrusted with the budget funds and task, help shop for bargain, check flyers and more. Setting house-rules about who gets to pay for what and when is also important when you have young adults still living in the house or have boarders. Family budgeting allows the channel for discussion and eventually mutual agreement on financial goals and priorities.

Perhaps the most important part of all, is that family budgeting helps us all learn where the money actually goes, as opposed to where we think it does or should go. Normally very different things! The initial realization of the amounts (usually larger than we think!), involved on incidental, discretionary and impulse buying is an eye-opener for most and ends up saving families all kinds of money they never knew they had. Just brining that into the awareness and our conscious mind tends to put a stop to unnecessary expenditure.

Mall crawling and hanging out in retail stores to kill time, is counter-productive and part of the reason we spend frivolously. From bookstores, to lottery tickets, gourmet coffee, food-court lunch, and a quick movie, items you do not really need, but think you or your spouse or kids would like leads to hasty, flawed and almost distorted decision making. The thought, actions and actually purchases are not budget-driven and money conscious at all. All these things add up over time. Smoking, daily coffee (or two), buying candy, chocolates, pop, magazines and more to ‘kill time’ are all money-guzzlers that should be avoided.

Other examples of incidental money-guzzlers are parking meters, donuts, shoe repair, ,raffle tickets, fund-raising, car wash, pay phone. Avoid it is probably unrealistic, but family budgeting, logging and tracking at least makes us more aware of these categories and ‘traps’. Have a category in your budget for Miscellaneous and track it for say 3-6-12 months and see how it adds up!

Beware the flyers, advertisements, special discounted sales and other retail or sales tricks of the trade that tempt, entice and lure you in to spend your precious dough!

Keep on tracking spending and income no matter what. A good tip for family budgeting is, at least initially, get a notebook and a pen and write things down as opposed to going to high-tech, spending money to get it done etc. Avoid this being or becoming just another unexpected and unplanned expense! It is supposed to help you, not hurt you. Tools are great, but process and results are better.

Family budgeting help you focus on the different types of expense you and your family and household face. The annual ones are the hardest, we tend to put them on the back burner and they tend to be larger amounts too. Having them in your budget assist us not forgetting there major expenses like school fees, judo or gym memberships, dance classes, Christmas and birthday gifts, babysitting or nanny-salaries and more.

Fiscal restraint, wise decisions, weighing options, informed choice, planned set and formulated goals and projection estimates and steps to get there, all work together in the family budget, to get you back on track and on the road to enjoying your dollar-earnings.

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