Making a family budget, step by step
Larie Schoap, Special to the Gazette
Thursday, March 26, 2009
In today’s economy, having a family budget is more crucial than ever.
If a business ran its finances the way many families run theirs, that business may soon go out of business. Like a business, families and individuals need to think of income, expenses, investments and even a salary for itself.
Money does more for us than buy the goods and services we need and want. It influences how we feel about ourselves and other people. It has a great deal to do with our level of living and our ambitions; therefore, money has a great bearing on the degree of satisfaction we gain from life. No one is born with the ability to manage money effectively. It has to be learned and developed with practice just like any other skill. The fundamental value of money management is the underlying reason for its effectiveness, and the planner is required to think things through before spending.
A budget is nothing more than a tool of planning. It shouldn’t be so inflexible that you can’t buy something when you need it, but it should help set priorities. We all have limited resources. It’s easy to think of more things to buy than we have money to buy them. A budget helps us adapt our wants, list and spell out what is urgent or primary and what is only a secondary desire. It’s a reminder of what’s important in your financial future. Planning is important. A financial plan (budget) can help:
• Live within your income.
• Realize personal goals.
• Maintain a good credit history
• Spend more effectively.
• Develop economic competence and confidence.
Credit is a highly useful resource, and the privilege of using goods and services while paying for them at an additional cost has been a plus to both the individual and the economy. Overspending is easier with a credit card because there are not built-in controls. A money management plan or budget is built on choices which in turn are based upon your ideals and principles, the way you want to live. Each of us considers some things more desirable, more important than others. These are our values. Personal goals are the targets toward which we direct our lives. They grow out of values and dictate our financial goals. One person’s extravagance may be another’s necessity. Setting goals on what to do with your money is important, and you will have a plan and won’t be wasting your money.
Most people have probably already adjusted their spending habits due to the high cost of gas and food. Each and every one of us are making choices on what we do every day with our money. Some people may have started car pooling, reevaluating food bills, or changing plans for a vacation. You might even be thinking about the type of vehicle that you drive. And I’m sure the Chamber of Commerce would love to hear that more of us are staying in town to shop vs. heading up or down the highway to Topeka or Wichita . Setting goals
Every person and every family have different goals for their money. What many people need to do is write down those goals. The one goal that I hope everyone has is a savings account. It is recommended that you save between six months to one year of your annual income in the event of job loss or illness.
• A short-term goal should take less than a year to accomplish. This may be to start a savings account or not to have any more overdrafts.
• An intermediate goal may take a few years to achieve, such as saving money for a vacation or down payment on a home.
• A long term goal of five to 20 years could include savings for children’s education or for retirement.
These are questions that you should be asking yourself and your family before beginning your budget process:
• Do you write down your goals?
• Do you know how your values and goals influence your spending?
• Do you have a savings account?
• Do you keep a record of what you spend?
• Do you balance your checkbook?
• Do you use a shopping list?
• Do you pay your bills on time?
Getting started
Because its a family budget, I think that it is important to include your children in the budget-making process. If children are old enough to spend money, they should be old enough to be included in the decisions and reasoning behind your family budget.
An instructor in family economics decided her children were not getting the big picture about why she needed to purchase important items and why not to buy certain other items. So she brought her paycheck home in $1 bills.
With this large stack, she then had the children count out the house payment, the car payment, etc. Once all the bills were paid, she could show them exactly in real dollars how much was left to spend on extras. She put it on their level for them to understand. Not a bad idea.
Remember nothing spends faster than cash. Deposit your money into your bank accounts and then when you spend any money, you will have a record.
I suggest that you put your budget up on the refrigerator. Write everything down. You won’t know where the money is spent if you don’t write it down on this form and in your checkbook register. If anyone would like for me to assist them in getting your family budget set up, my phone number at the Lyon County State Bank is 340-9830, and I would be more than happy to assist any person or family. I also have copies of budget and goal forms that you may pick up at my office at 902 Merchant St.
truman (anonymous) says...
Good job, Larie. Thank you.
April 6, 2009 at 12:51 p.m. ( permalink | suggest removal )