Financial Planning

What is a family budget?

A family budget is a set of instructions or laid-out-in-advance procedures which act as a guide to paying your bills, buying things members of the family need, putting aside some money as savings, and so on and so forth. Nobody in your household should spend any money, outside of an absolute emergency, whenever doing so would cause the household to go over the family budget.

The family budget tells you your financial spending and consumption limits for a given period of time, usually for one month that based upon the following:

Your household’s total income, your debt load (including taxes), your regularly occurring expenses such as your electricity or phone bill the lifestyle you want to maintain or realize

All family budgets are intended to help you realize your goals and take care of all immediate needs, such as food, for yourself and your family while at the same time getting your household to make more money than it spends.

What makes a family budget successful?

The cornerstone of a successful family budget, or any budget, is by making sure that more money is brought in than goes out. You cannot realize your financial goals and lifestyle dreams if you and your family members are spending money that you don’t have. If you are living in debt, you must assure that your household income is greater than your consumption expenses every week, month, or yearly quarter. The most important goal of creating the family budget is to get yourself out of debt, and to do so as fast as possible.

How does creating and then maintaining an effective family budget work?

It all begins with preparation and thinking ahead. The word economics literally means “household management” in its Greek root. Apart from making sure all the people in the house gets along decently, the financial part of household management is the most important part.

You should draw up a plan of expenditures and you must follow it. If you do it right, you should be able to maintain your current lifestyle, and have enough money for recreation and leisure (which are important to mental and emotional health). But, maintaining this budget could mean changing certain spending habits. If that’s the case, you and all your family members who are working will need to comply with the family budget.

At least for most of us, money is limited. This means you need to prioritize how you spend your money. When most of your immediate needs are taken care of, your family budget will guide you to pay down your most pressing or outstanding debts first. For the vast majority of people, this will be their mortgage or credit card debt.

Pay Yourself First

Creating a family budget, however, also works on the principle of “paying yourself first”. This means that you put aside as much money as your budget permits toward savings and investments. Your “investments” might be a money market account, CD at your bank, or it might be some stock investments made with the guidance of a financial professional. But at any rate, you must make sure that you take some of your income off the top before you get down to the business of paying the supermarket for your food and then paying the bank for your mortgage.

A Household Budgeting Tool that Works

United First Financial has a proprietary software program called the Money Merge Account This unique software is designed to help you calculate with pinpoint accuracy how to balance your household finances to achieve the maximum debt pay down per period while still meeting all of your household’s financial dreams and goals. The Money Merge Account is an incredible tool that anyone serious about household budgeting should look into.

Do you have financial problems? Then a budget is the answer if you are tired of wondering where your income went. A budget is the answer, if you don’t have savings. A budget is also the only solution to getting out of credit card debt.

You can purchase a 6-column ledger or use an electronic ledger in recording your expenses and income. Or purchase budget software. While an electronic ledger (like Excel) functions by keeping your financial records and doing your computations, budget software programs will do much more.

Here are several features your budget software should have, to effectively help you keep track of expenditures and record your savings.

1. The budget software should with a worksheet, show you where your funds go, and provide you with the exact amount of your current financial situation.

2. The budget software should have in addition to the more common ledger title columns, make available the option for you to create your own personalized account titles. This makes it more accurate, and enables you to keep track of daily expenses, of your saving accounts, payments for insurance, auto, utilities payments and even entertainment expenses.

3. The budget software should allow you to compare the financial differences between the budget you set against actual expenditures. It would be great if this feature were accompanied by a reminder feature that tells you, you’re overspending.

4. The budget software should provide you the option of creating and tracking individual accounts, should you wish to set one for you and your spouse, or your children. You can use this to monitor each child’s expenses.

5. The worksheet visuals of the budget software should be easy to understand.

6. Usage of the budget software must be user friendly and have help menus that are built in the program.

After you’ve read the company brochures, and spoken to the sales staff, request for a demonstration. Personally test the budget software, to make certain you have ease of use. Ask the company they provide product updates at discounted prices.

Make sure that the budget software vendor have an efficient customer support and after sales services. Request for list of their clients and talk with these people. Ask to be sure that you can reach them on the net, by phone and email. List their physical address, should you need to drive by their shop.

You need to be honest, committed and disciplined in making and keeping a budget. If you do, you’ll be able to get the most out of your income in spending along with saving wisely.

Budgeting is the process of forecasting and planning revenues and expenditures for a certain period of time. A budget refers to the list of planned income and expenses.

There are many methods of budgeting utilized by individuals, families, government institutions, medium-sized companies, and big corporations. All these methods involve identification of the sources of income and planning the intended expenses in a way that it would tally with the total income.

The goal of budgeting is to make a balance between the inflows and the outflows so as to prevent a deficit. This makes budgeting so important. Despite this, many people still do not know how to budget their money.

With the help of advanced computer technology, budgeting is now easier than ever, especially for individuals who are not inclined to doing this task. Budgeting software can now be easily downloaded from the Internet and can be used right away in planning your income and expenses.

Budgeting software varies in terms of their features. Some software is good only for personal and family budgeting. This type of budgeting software can help you keep track of your daily expenditures. It can effectively manage your credit card spending and make a household financial plan. This kind of software usually costs about $10 to $40. Such programs usually offer a free trial, so it would be better to try them first before you purchase them.

Software that is specially designed for managing big corporate budgets is more complex in nature. It has more features compared to personal and home budgeting software. These can aid you in creating an accurate budget, making financial analysis, creating financial statements, consolidating financial reports, and managing and planning transactions and business workflow.

Inexpensive corporate budgeting software is priced at around $30 while more comprehensive versions of the software are sold from $70 to $80. Some are subscription-based so you have to pay either a monthly or quarterly fee rather than a one-time fee.

We may have come across this article because we are in a financial crisis or perhaps we just want a better grasp of where our money is going. So let’s go over some basics of financial planning.

The essential ingredient to having control over our finances is having a budget. The heart of budgeting is really quite simple; you bring in more money than you spend. At times it can be frustrating to balance it all out, but there are numerous resources out there to help us get started. We also live in a society of consumerism — we want the best and the biggest — NOW. If we can learn to save for what we want, while living within our means, then ultimately we can have what we want but owe nobody anything. At first, as we’re viewing our big screen televisions with our surround sound it may be wonderful, but the gnawing that we owe somebody else for something that’s quickly depreciating isn’t worth it. Of course, sometimes we have to put things on credit to survive — and I’m not talking about this — I’m talking about keeping up with the Jones’s. And if we decide to put something on credit — because we get cash back or free airline tickets — and if we pay it off immediately, then that’s actually smart. It’s accumulating things that we can’t afford that I’m talking about.

Make a Budget
Calculate how much money we have coming in per month. Categorize expenditures. Let’s first list the bare essentials that are required during that month. I categorize my budget into bills (like house payment, utility bills) — things that we owe and we can’t change. I then have a certain amount of money set aside for groceries and gas. I also have a category for entertainment and extras. That’s where we can really be prudent if we need to be, and also creative! Pay off debt. Let’s define what debt is first. Debt is the obligation of owing. Now let’s differentiate between good debt and bad debt. Bad debt would be credit card debt. We want to pay that off as quickly as possible especially if the interest rates are high. A good rule of thumb to remember is that if the value of something depreciates then it’s bad debt. For example, going to a show and putting in on your credit card — with the interest rate (and depending when you pay it off) you could end up paying 3+times what the actual ticket to the show cost! A bigger example is putting your car on credit — as soon as you drive that car off the lot, its value has depreciated significantly and now you have to pay for the car and the interest! Now on the other hand, good debt would be something where the value would increase over time. In other words — you are more than likely to make more money through this investment than the money you borrowed to make this investment. A good example of this is a home purchase or going into debt to get a higher education. You fully expect to make more money due to this investment. Pay off your bad debts. Of course, after your bad debts are paid off — attack your good debts. Make a plan to pay off your house quicker than 30 years if that’s possible. It’s all more money in your pocket, and less interest. Invest and Save. Now you’ll owe no-one anything and you can use that same amount of money you were paying things off to invest. Invest in your retirement, your children’s education, save for your future.

Having a financial plan is definitely a balancing act — between needs and wants — good debts, bad debts — and investments versus safe saving. There are numerous financial resources out there — books, programs — to help you know where to begin. Planning a budget takes time but it’s a worthwhile investment for your future!

Getting started on creating your family budget can be as easy as 1,2,3. In just five steps you can be on the path to sorting your finances. Budgeting is an important first step in planning your family finances and evermore important in this day and age with rising costs. A budget is an empowering tool letting you control your money instead of your money controlling you.

Step one: Find out your monthly income.

This is your take-home pay and regular funds from other sources such as rental, interest etc. Income from all member of the household should be included.

Step two: Establish what your expenses are.

Writing your expenditures down will provide you with the unique opportunity to find out if your money goes for things that you do not really need. This list should include necessities such as food; regular bills such as rent; insurances, school costs, vehicle expenses and incidentals. Also include entertainment and any saving.

Step three: Work out how much you spend on each expense.

Some expenses will come in regularly each month but others are perhaps annual or quarterly. The trick here is to include each expense in your monthly budget. An annual bill for example will be divided by 12 to give you the monthly figure. This way there’s no nasty surprises when the bill comes through. Also allow a sum for unexpected expenses.

Step four: Compare your monthly expenses with your monthly income.

This could result in a surplus (positive) or a deficit (negative). A surplus is great as you can save more — or spend it. A negative means you are spending more than you have coming in and will need to cut costs.

Step five: Balance your budget.

If you have found that your family budget shows that you are spending more than you are earning you will need to cut back on spending. Work out how much you need to cut down on and find where you can make these changes. Do not make cuts in your budget that you are unable to live with or that are unrealistic. When you make these decisions keep your real expenses and living realities in the forefront of your mind. Re-balance your budget after you have made the cuts.

The good news is that whether you are “in the red”, just scraping by, managing to save a little, or a lot, this five step family budgeting process will highlight areas where your immediate attention is needed. And if you are trying to get out of debt cutting expenses is crucial and not only if you are over budget.

Re-visit your family budget often — it should be an active process and is an invaluable tool to help you keep your fingers on the pulse of your financial situation. If you can stick with your family budget it can help you to meet your goals, get out of and stay out of debt, to always pay your bills on time, keep track of your spending and make the most out of your dollar.