What’s the secret to a good family budget? Ask anyone and you are likely to get a shrug or a confused answer. While many will tell you that budgeting is sensible if you want to avoid the creditors knocking on your door, few have one set up for financial growth and peace of mind.
A single man or woman can create a budget to help them build equity and savings, but for the family man, a budget is harder to do since there are more variables. The needs of the other members of the family must be considered. And as children grow into adulthood, the budget needs to be adjusted periodically to meet those changing needs.
For a family budget to work, the basic structure needs to be flexible. A basic family budget must cover five key topics. Once they are known, the responsibility can be parceled out to the member who can best handle them. Family budgets need to be run much like that of major corporations to be effective. But a budget does not need to be complicated.
Start your budget by looking at the five key topics and build your budget around them.
1. Obligations such as:
* the mortgage
* apartment rental fees
* association and professional fees
* day care costs
* auto, home and life insurance
* car loans
* student loans
* tuition fees
* property, income and sales taxes
2. The Necessities of Life
* home maintenance and improvements
* pest control
* utilities, including gas, water, heat and electricity
* car maintenance
* parking costs and fees
* cost of the professional housekeeper
* internet services
* dry cleaning
* cable TV
* lunches and dinner
3. Small Change and Pocket Expenses:
* Work lunches
* Candy machine purchases
* Snacks, soda, coffee and tea
* Newspapers and magazines
* shipping costs
4. Family Allowances:
* the cost of entertaining, parties and dinner
* weekend outings
* decorating and landscaping
* yard maintenance, mowing, pruning
* power and garden tools
* cookware, dinnerware
* furniture and appliances
* video rentals
* alcoholic expenses
5. Personal Allowances:
* CDs, audio tapes
* haircuts and manicures
* skin care and beauty products
* sports and recreation costs
* charity donations
* evenings out with friends
* computer games, software
* cell phones, ipods and PDAs
The list is certainly a long one, but once the dollars are put down next to each item, it’s easier to construct a budget with little guesswork. Of course it’s understood that everyone in the family must do their share to contribute toward sticking to the budget as assigned them.
The very purpose of a family budget is to:
* Keep control of monthly costs and spending
* Save for those major purchases like travel overseas
* expand the standard of living
* instill the value of money and how it should be used
* build up long term investments for growth and equity
* build up an education fund or a retirement nest egg
* eliminate the need for anyone to worry about money
* teach everyone the need for self-reliance rather than rely solely on government welfare programs or financial assistance from friends or the community.
* Become financially free and avoid the debt trap throughout life.
* teach the real value of money and how it should be used.
These are basic tips. The only necessity is to get each member of the family to act responsibly in their assigned duties. While mistakes will be made, if everyone pulls together to achieve the same financial goals, success can be realized and everyone will enjoy the financial rewards that good financial management brings.