Each of us has probably noticed that for the same income, one family can have ongoing financial difficulties while the other has enough money for everything. Some of us barely have enough money to get a child ready for school, while others manage to save up, gamble on https://nationalcasino.com/casino/lobby, and plan vacations.
It turns out that family well-being depends on financial and money management skills just as much as on actual earnings. And if approached lightly, this can lead to real financial problems.
Here we inevitably come to the question of the family budget, its necessity, and the importance of keeping it in every family. A family budget is a financial forecast of all family income and expenses for a certain period of time (quarter, month, or year). Before we start talking about planning, it is necessary to say that we are not talking about absolute savings, stinginess, and rejection of all possible goods and pleasures of our time. And that a truly frugal attitude to money does not mean that at all.
Why Do We Need to Keep a Family Budget?
The following arguments can be made in favor of keeping a family budget:
- Only by planning and creating a family budget will you understand your financial goals (real, long-term) and move towards achieving them. You can, of course, endlessly drift downstream and spend money on momentary desires. But then a vacation trip, an expensive car, and a new apartment won’t be coming to you, but away.
- Regularly taking an outside look at all your spending and spontaneous purchases can open your eyes to completely unobvious things and reconsider your approach to spending. Are you sure you need 40 handbags, some of which have never left your closet? A family budget can help you figure out your priorities and focus on your long-term goals.
Unpleasant force majeure tends to happen at the most inopportune moment. Therefore, every family should have a financial safety cushion. It will not be easy to overcome a financial crisis without it. The family budget necessarily needs an article – “financial cushion”, it will help to avoid catastrophe no matter what.
How to Manage a Family Budget
In a nutshell, the effective management of the family budget can be formulated in several principles. Some people look for options to maximize savings and struggle. After analyzing the budgeting attempts of some families, it is possible to draw certain conclusions and formulate recommendations that will certainly help in this difficult matter:
- A budget must be maintained regularly. Otherwise, there is no point in even starting.
- Shopping should only be done with a list. This will avoid spontaneous and unnecessary spending.
- Agree in advance on the amount of each family member’s savings.
- Pay yourself first. Save money first, then spend it.
- Simplify accounting as much as possible. There is no need for unnecessary details.
- Budget based on today’s income and expenses. No “grow-out” budget.
- The budget must plan for investments. Without incremental cash flow, achieving your goal will be harder and slower.
- Reasonable Savings. Everything is good in moderation.
- Get rid of credit. No credit at all. There shouldn’t be any.
- Income does not exceed expenses (no comment).
Shared Goals
Sometimes one member of the family goes to his personal goal – to reduce regular spending, save money for a vacation, or to get rid of credit, and for the other to achieve this goal is not a priority. So be sure to discuss the goals in advance and seek to agree on them, so that they become truly common.
So if you want, for example, as soon as possible to close the mortgage, you should definitely discuss it with your spouse, to regularly spend on it a predetermined amount and do it if possible by joint efforts. That way it becomes a negotiated and agreed upon goal for both of you, and it starts to work.
A Few Final Tips
For someone who intends to seriously deal with this issue and begin to put the family budget in order, you must first understand that saving and stinginess (or greed) are not the same things. And planning expenses is not only and not so much a job for the poor, as for the rich and well-to-do.
Moreover, this is what enables them not to waste all their income, but to save, multiply, and invest part of it in order to increase their capital. Poor people, on the other hand, are more prone to chaotic indiscriminate spending, which, if their income increases, only get bigger. And it turns out that with higher earnings, the financial condition is at best the same, but as practice shows, the financial problems in this case only worsen.
Moderate savings will certainly play a role in your financial well-being and will definitely help to ensure a confident present and happy future for you and your family.