How to Set up a Family Budget
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."
"The average family exists only on paper and its average budget is a fiction, invented by
statisticians for the convenience of statisticians."
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
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
aware of their proactive 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.
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.
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?
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.
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.
Initially, when setting up your family budget probably for the first time, it is acceptable
when estimating some of the expenditures and cost to err on the higher side. This will
definitely show you where you would need to cut back if you had to add in budget line
items or budget for big purchases like appliances, furnace replacement etc.
Family budgets keep it real, in the moment and us humble, on our toes and accountable.
Some realities we will have to live with. Some fixed costs we are not able to reduce right
away or at all. The fact of the matter is, we are on the look-out and actively finding other
and innovative ways to cut spending and costs that we would otherwise not have been
motivated enough to do of our own accord.
Surely, the most interesting effect of the family budget on most people, is revealing our
personal spending habits, preferences, weaknesses or “buttons to push” my kids call
them. Family budgeting helps us to get to know what they are and improve on them.
Where and why, on what and how much are all factors that impact while our money keeps
vanishing. We are most often the biggest culprits here. Shopping excursions should be
minimized; they are just a good excuse for buying unnecessary items.
Overspending while with a group of friends or peers are all too common these days. Grocery
bills hide a lot of “sins” or impulse buying (chocolates, chips, magazines, ice cream etc.).
Also knowing when during the year you tend to spend more money, is also important – bulk
buying might be the answer. Think juice and snacks when the kids are home for summer for
example. This also helps people realize that funds should be available almost year-round and
that life is unpredictable.
Family budgeting is one of those activities that none of us really truly value, until we see
or feel it make a difference. If you stick with it long enough, disciplined and committed,
you will experience the dynamic impact and life-altering influence and contribution of
this tool and process. Happy number crunching! Have fun creating your own family
budget.
Therefore, for now, we will stop our discussion here. Throughout these pages, attempts were
made to show the need, benefits, nature, elements, advantages, processes and techniques for
family budgeting that can get you started right away, offering practical advice and poignant
suggestions that apply to your unique situation, whatever that may be.
We trust it has been time well spent and happy trails on your journey back to fiscal control,
independence and empowered decision-making. PASS IT ON.
