How money is handled in a family unit makes or breaks the situation. That is because money has, for a large part, been noted to be a leading source of conflict in the typical home. To be on the safe side of money issues, it is important to know how to handle this volatile resource.
The primary responsibility of our discussions here below endeavor to offer more explanations on the subject matter of the family budget planning. We are going to look into each angle of the discussion to acquaint you with the knowledge you need to know to be able to draft a suitable budget.
Significance of Family Budget Planning
Even before we delve into discussing the steps to follow in drafting a budget, it is important to know the significance of budgeting at the family unit for a start. Below is the importance of making and adhering to a family budget:
Streamlines Family Expenditure
The number one reason why families budget is to streamline the expenditure of the family. Through budgeting, it is possible for the family unit to draft a list of the expenses it intends to spend on. Then, the plan enables them to adhere as closely to this list of expenses as can possibly be.
Prevent Unnecessary Financial Losses
If not properly accounted for, the money that is acquired may often be wasted or spent in a manner that is not proper or appropriate. Drafting and adhering strictly to such a list helps to prevent any unnecessary financial losses. The only prerequisite is that the budget has to adhere to the letter.
Minimize Money-related Conflicts
We have already explained that many conflicts in marriages revolve around the way in which money is spent. One sure way of avoiding these conflicts is to draft a budget and stick to it wholly. By doing that, the various members of the family will know how and where to spend their money beforehand.
Offer appropriate guidance
Budgeting is not just about spending money. It is also about identifying the long term goals and then working towards achieving the same. Thus, by budgeting, the family unit gains appropriate guidance on just what they can hope to look up for or channel their long-term efforts towards.
Facilitate Savings
The sum total of the budgeting exercise boils down to increased savings. Family members are able to know how much they have and how much they can possibly spend. Such a piece of knowledge will definitely help in knowing how much they can actually save in the process.
How to Create a Family Budget Planning
We now look into the steps involved in creating a family budget. Please note that the exact procedures may vary significantly from family to family owing to the uniqueness of the needs and circumstances of each family unit.
We now look into the steps involved in creating a family budget. Please note that the exact procedures may vary significantly from family to family owing to the uniqueness of the needs and circumstances of each family unit.
Step I: Create money goals jointly
Start off the exercise by creating money goals jointly (as a family unit). You have to sit at a round table, talk it out, and agree on an amicable way forward. Goals here simply means the things you want to use your money to buy. Needless to say, you have to draft the goals on paper for the sake of easy future references.
Step II: Gather Information about the sources of your income
After knowing the goals you have in mind, you now have to know where your money is going to come from. First and foremost, you have to know who exactly shall make contributions. Is it the husband only or the wife as well? And how much is each person bringing to the table?
Step III: Find out how much you intend to spend
Follow the above procedure with how exactly you intend to spend the amount of money you have. This piece of information is closely tied to the goals you have delineated above. But it goes beyond that, though, to include other expenses like monthly expenses, emergencies, fixed and variable expenses, that you have to pay no matter what.
Step IV: Delineate the Debt Repayments
The chances are that you might be servicing some debt too. You have to take care of this as well. That is because defaults and late payments often come along with some penalties. Thus, you should dedicate a section purely for the list of the total debt payments and the associated installments.
Step V: Determine how the surplus (if any) is going to be spent
You might be lucky as a family to remain with some surplus money after you have cared for the major expenses. At this stage, you have to determine how this surplus amount is to be spent. You might decide to save it, go for an outing, have some fun, or purchase an expensive item.
Step VI: Skim and Take a Vote on the Budget
It is imperative that you agree on the budget plan as a family. For this to happen, you who drafts the budget ought to place the same on the table. Let every other member of the family skim it and voice his or her opinion. Conclude the exercise by taking a vote for the budget to be deemed binding.
Step VII: Abide by the Budget Plan Faithfully
Drafting a budget in and of itself is not enough. You have to abide by it faithfully as a family to be able to bring it to fruition. That can only mean implementing the provisions of the budget as diligently as can be. Do not hesitate to make any adjustments if need be.
Free Budget Templates & Worksheets
Budgeting at the family unit is a bit too complicated. You can never rely on your own expertise, especially if you have too many expenses to cater to. It is for that reason that we suggest that you use the budgeting template to do the job. This gives you a skeleton framework against which you may put in some data.
Top Budget Planning Tips
For you, as a family, to be able to make and adhere to a strict budget, there are some tips you have to abide by. We list and explain them here for your consideration:
a.) Pay the Kids to Work
To boost your teamwork, you may consider letting the children work and earn a commission for you. You may employ them to work for you so you could focus on more important things. That will also inculcate some responsibility to them.
b.) Create Long-term Financial Goals Jointly
To be able to flow in the same direction, you have to create long-term financial goals jointly. For this to happen, you have to meet as a family unit and speak out your long-term plans. Then, you collate the views and cost for the same to arrive at the final outcome.
c.) Conduct Monthly Budget Meetings
For better implementation of the budget provisions, you should hold monthly budget meetings. The purpose of the meeting is to follow up on the progress of the budgeting and the overall expenses. It is at such times that any adjustments may also be proposed.
d.) Keep Accurate Trail of your Expenditure
Other than holding monthly budget meetings, you also have to keep an accurate trail of your expenditure. This you do by following up on your expenses against what you had initially budgeted for. You may have to preserve all the receipts as they are the ones that will provide the data and the figures.
e.) Make appropriate adjustments if need be
If in the course of keeping an accurate trail of your expenses, you note some huge discrepancies between what you budgeted for and what you actually spend, you have to make appropriate adjustments. These adjustments, for a large part, entail you cutting down your expenses to line up with your prior plans.
f.) Rein in Unnecessary Expenditure
Not every expense is worth your money. There are some which you can comfortably do without. Find these expenses and how to circumvent them as well. Doing that will go a long way in easing the financial burdens that are felt while implementing the provisions of the budget.
Conclusion
Knowing how to budget for your family is a thing that is crucial if you have to break the cycle of indebtedness and put your family on a sound financial path. Please take your time to read the explanations above keenly to know how to set out.
Practice, they say, makes perfect. To be able to up your skills, we opine that you consider making mock budgeting. As you do so, you will be able to learn the secrets that the issue of budgeting entails. That way, you will also know how to seal the various loopholes with ease!
