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How to...
"Set up a Family Budget"
"A budget tells us what we can't afford,
but it doesn't keep us
from buying it."
William Feather
INTRODUCTION
"The average family exists only on paper
and its average budget is a fiction, invented
by
statisticians for the convenience of statisticians."
Sylvia Porter
Unlike the quote provided above, seemingly reflective
of general opinion on family budgets
today, we will attempt to take a much more positive
approach to budgeting, as a family
oriented, user-friendly, financial management
and planning tool and life-enabler.
However, when reflecting on family budgeting
and inquiring as to why not more families are
actually using it, it becomes self-evident that
similar skepticism runs rampant and deep in
reality
and society, even globally so.
Once you start probing family budgets, expending
time and energy researching the subject in-
depth, it becomes quite clear, that most families
are caught in a vicious, almost never-ending
cycle of "What comes in must go out."
Most families might feel that budgeting is a
futile effort, unnecessarily burdening them
with
thoughts and ways, to go broke methodically
and slowly, without the creature comforts and
indulgences of our human modern-day society.
Others might voice that they feel as if they
are merely throwing money away, in a never-ending
and dizzying spiral of spend, spend, spend.
People are getting deeper and deeper into debt,
no
matter how hard they try to get out of it. Questions
are then raised : How do we stop these
courses of action? How do we change the thinking
around family fiscal discipline?
Put simply, in "How to set up a Family Budget",
we focus in on how to empower families to set
up better, more realistic budgets, stick to
them and celebrate their successes (and learn
from their
failures!)
Families eventually do have a monthly surplus,
see their savings start to grow, consolidate
their
debt, set aside discretionary funds and personal
allowances, build their wealth and become more
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aware
of their pro-active involvement and responsibility
regarding their lives and finances. This
is when excitement builds and fundamental thought
patters as well as spending attitudes are
changed.
Budgeting is seen as an accurate measurement
of success when significant behavioral
transformation is taking place on the landscape
of the family budget, spending habits and
financial patterns we observe over time!
Do you ever feel that you do not have enough
cash at the end of the month to pay bills, buy
necessities of life? Are you barely making a
dent in your credit card debt balance, no matter
how
hard you try?
Here is a reality check for all of us: if we
choose to spend it, it is gone for good. We
cannot
spend it on anything else. Are you perhaps worried
about a nest egg for your golden years or
savings for early retirement? Then you have
arrived at a source that can provide some prudent
tips on how to start, finish, implement, stick
to, revise and refine a family budget.
The family budget is a dynamic process, even
more so than a mere static work-product, result,
process-outcome or document. It will, can and
should change over time. It becomes a barometer
of a family's fiscal circumstance, resources
and health.
Maybe budgeting is not as much about reflecting
on what you cannot have, but more about
thoughts on how to stretch, invest and spend
your earned dollars more wisely. In short, it
is about
making your money going further.
This quick-reference how-to guide was developed
to assist you with setting up your own
personal, household and family budget, to
help you with all of the above and more!
A couple of general money-savings will also
be provided in these pages. There are also thoughts
and spending patterns that need to change, in
order to become fiscally more disciplined and
many techniques, attitudes, habitual behaviors
that we need to un-earth, evaluate and possibly
change, before you even start budgeting.
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For
example, being a bargain hunter looking for
good buys, cutting down on careless spending,
being on the lookout for careless credit card
spending and letting the person who handles
money
best in your household actually take care of
it, are all good examples of what we mean.
For most households, a budget is no more than
a spending plan. Any spending plan can help
you
see where your money is going. It fits your
spending to your income. It reflects how we
get the
things we want and need most, while being ready
and prepared for bills we must pay every
month.
For most families it is simply about making
a budget you can live with and stick to easily.
It is
not a difficult exercise, but one most people
fear, avoid or dread because of the unknown
and
perceived complexity of it (sometimes wrongfully
so!).
Part of the goal of this guide is to demystify
family budgeting and highlight an easy
systematic process to setting up a quality
family budget.
Many things actually drive our expenditure.
We choose to spend our money on things we value,
need, prefer or consciously choose. For some
it is clothes, for others it might be something
as
simple as taking that yearly vacation.
Whether you are making financial decisions for
yourself or your household, you might have to
make some serious choices and adjustments regarding
your financial freedom and situation.
"How to Set up a Family Budget", is
a quick-reference, easy, how-to guide, meant
to take you
through the typical, who, why, when, what, where
and how questions typically asked when
considering fiscal planning for the household
and or budgeting in general for your family
need,
means and circumstance, now and for the future.
Budgeting is not just about restricting spending
and living a cheapskate life. It is about
insights, wisdom, informed decisions, action
and sustained discipline when it comes to your
household financials.
This guide will invite you to learn more in
these pages about systematic budgeting. It focuses
on
practical application and zooms in to apply
these "best practice suggestions" in your own
home.
It empowers you to put together a dynamic, financial
plan that suits your pocketbook, means and
circumstance.
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Financially speaking, assess quickly where you
think you and your family are today.
· What kind of a picture do you have?
· Could you come up with something?
· Did you have the data and numbers you needed?
· Would you be able to plan for where you want
to be and start living your life today as a
fiscally sound and disciplined family with the
information you have at your disposal at
present?
Money makes the world go round! It is no secret
that some of us have more, some have less. We
deal with our own personal finances and cash
management distinctly differently.
Households have varying needs, means and circumstance.
Our money-management skills are
also at different levels, as is our debt and
savings!
Budgeting has to do with most of these perspectives
and reflections.
The purpose and goal of family budgeting is:
· financial situational analysis and informed
awareness,
· (ii) cutting cost,
· (iii) gaining control or curbing spending
and
· (iv) Starting to save, building up wealth
and liquid assets over time.
There are many phases and steps to go through
when creating a budget.
If you are looking for ways to manage your
money better, making it reach and stretch
further, and providing you with financial
security and a more solid future, then you have
come to the right place.
In this brief introduction on family budgets,
we have already introduced our first couple
of
key questions
Why an e-book or how-to guide on setting up
a family budget?
Why would or do you need a family budget?
What is the business case for and rationale
behind family budgeting?
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What are the benefits and advantages of a family
budget?
We elaborate a little more below. For most people,
a family budget is the equivalent of a
simplistic process: money is earned and comes
in; money is spent and moves out!
It is a fluid, easy-flow, one-directional, cash
management process. It is driven by daily life,
a
spending-orientation, or no plan at all!
For most families, income is also fixed and
outflow typically increases over time, as the
needs of
the family fluctuates and changes. Loading up
on debt is also very typical for the majority
of our
families. If this sounds very much like a vicious
circle, it is. Most families are caught up in
it
and constantly battle to get out.
Mostly, we think that we wisely spend our money
on necessities like food and clothing, gas and
household or family needs, but can rarely put
a finger on where the money actually goes, let
alone produce a budget!
A good place to start is to monitor these
expenses.
Take stock of your fiscal situation. Start with
assessing where exactly you are in your financial
life and circumstance. Most of us think we know,
but we really do not.
That is, until we take the time to actually
list, study and analyze the situation. Figure
out what
your financial worth is, look at all financial
goals, and set a timeline for reaching them.
Does this
sound like an action plan? Where do you start?
A good suggestion is your bank statements, tax
return and recent current credit report a
financial asset statement if you will -and an
overview of the current situation.
The premise is simple: you can not get to arrive
where you want to be if you do not know where
you are today, what it will take to get where
you need to be and how to get there.
A well thought out, planned and realistic budget
will serve as a roadmap to get you there. It
is a
financial tool facilitating your financial dreams,
goals and aspirations, making them become a
reality. Budgeting will enable you to actually
reach your financial targets and set goals.
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WHAT IS YOUR CURRENT FINANCIAL STATUS?
How do you define financial worth? Is it cash
in the bank, savings and checking accounts,
RRSP's, stocks and investment portfolio?
Remember, anything you have that is of value
counts. All your assets form part of your financial
picture and health. Ask yourself: What is your
take-home pay, after deductions? How are you
paid? Is it monthly, weekly, bi-weekly? Then
you need to budget accordingly!
Think about all other sources of income, temporary,
seasonal, part-time - extra income, found
money and bonuses that you might have.
Maybe deciding to leave it out of your family
budget altogether is wise and advisable? (we
will
delve into this question a little later).
Try to find ways to do without some small creature
comforts and pleasures to reap bigger
rewards later.
Starting small, early and now, with discipline
and commitment, a steady, consistent pace and
amount every month, tracking and optimizing
financial phenomena like `compound interest'
(which we will describe later), will all feed
into this process.
We will take this journey into budgeting together
to see how it can change lives: yesterday, today
and tomorrow!
Back to listing assets and thinking about savings:
consider all banks, savings and loans, credit
union accounts, money market accounts, certificates
of deposit, Christmas club accounts you
might have. ALL LIQUID ASSETS that can be readily
turned into cash need to be included.
Consolidate accounts if you have too many accounts
spread out and save on banking fees.
Improve tracking actual spending better and
more easily. Earn higher interest and have less
exposure to identity theft or fraud by getting
a good handle on your current situation.
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