Simple Family Budgeting and Financial Planning
Find Time For Budgeting
When your life feels overwhelmed with a crazy schedule and very busy days, chances are that your finances are not getting the deserved attention.
Not feeling in control of your money, and missing a good picture of deadlines, bills to pay, and coming up expenses, can add a lot of stress to an already busy life.
A feeling of financial control is a great stress reliever. Stop money-related stress: find time for budgeting.
Start by making a list of your expenses.
A Family Budget Gives Peace of Mind
Achieving a family's financial stability would give you the peace of mind that can allow you to focus on other priorities in life, other than making ends meet.
To gain that financial solidity you've got to make a family budget plan.
But what is a budget plan? How do you make a family budget?
You're the CEO of Your Family's Finances.
Are you in control?
You can't control what you don't know. The main purposes of a good budget planning is to gain a clear picture of where you money “disappears” every month, and to take control.
Think of it as a business, and you (with your spouse, of course) are the CEOs.
A budget plan lets you be in control of how your money is used, and take actions to plan a more efficient and smart use of the resources you've got, no matter if you are rich or poor.
A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.
— Suze Orman
Expense Tracking is Worth Your Time
You need to review carefully your credit card and debit card statement and, if you buy with cash, you need to become a "receipt-keeper".
Create a box at home were you stash all your receipts for the month, everything, even the smallest cash expenses, they add up pretty quickly.
At the end of the month, schedule a time to go through your box and plug those amounts in a spreadsheet dividing them by category: groceries, eating out, clothes, gifts, etc.
For vending machines and no-receipt expenses you'll have to take note. Sorry, but you'll have to, to become in charge.
You'll be surprised of how much "miscellaneous" purchases you do, day in and day out.
There are also several good expense tracking apps for your phone or tablet, check them out. Some examples are Clarity Money, Simplifi, Tiller Money, and YNAB.
If you do this properly, you will have an exact picture of your spending habits, and plenty of information to start taking executive decisions. Decisions about cuts, that is.
Take Time to Plug Those Numbers In Your Budget
The first thing you need to do is to make a chart with different categories of income and expenses.
A simple excel spreadsheet would serve the purpose, but pen and paper is fine too. Excel comes with templates of personal budget already in the software.
TIP: When you go file > new… you can pick the format you like the most.
Find Your Total Income
Start by listing all the family's income and other money coming in like gifts, bonuses, etc. Total them up.
Then Calculate Your Fixed Expenses
Then list all the fixed expenses, those that are pretty much the same every month, like bills, rent/mortgage, and car payments.
If some bills come up only every few months, divide the amount by the number of months it covers, and enter the average. Like our water bill comes every 3 months, and it's usually around $240, so I’d enter $80/month.
Total up your fixed costs.
And Your Variable Expenses
List all the other expenses, like groceries, gas, cigarettes, eating out, vending machines, coffee, entertainment, etc.
Think about every little payment you make, don't forget the money you spend for your pets, dry cleaning, sporting events, or charity.
Total them up.
What's Your Bottom Line?
When you subtract your fixed expenses from your income, you find out how much you have available every month for variable expenses.
After you add up your actual variable expenses, and you compare them with that amount, you can see if you have the opportunity to save or if you are overspending.
TOTAL INCOME
- (minus) TOTAL FIXED EXPENSES
= AMOUNT AVAILABLE FOR EVERYDAY EXPENSES
- (minus) VARIABLE EXPENSES
= HOW MUCH YOU HAVE LEFT OVER OR HOW MUCH YOU OVERSPEND (IF NEGATIVE)
Setting Personal Financial Goals
Nothing works better as motivation as having targets, goals you want to reach.
It can be anything: being able to go on a dream vacation, buying the home of your dreams, ride a luxury car, you name it.
Write your goals down. The first step is determining what your short-term, mid-term, and long-term personal financial goals are is. Discuss it over with your spouse, and agree on your goals. The next step is to determine a good estimate for how much money you’ll need for each of them.
Prioritize each of your personal goals in order of importance, and then determine how long you have to save for each of them. Retirement could be many years away, but your short-term goals could be in a year or two.
Short-term goals can be accomplished within two years. Be sure every goal has a specific purpose, a dollar amount that it will cost, and a realistic target date.
Mid-term goals can be accomplished within two to five years. Make sure your goals are realistic and flexible. If you set your goals too high, frustration will keep you from reaching them.
Long-term financial goals are priorities that may take more than five years to accomplish. Most long-term goals require regular savings.
Money in the bank is like toothpaste in the tube. Easy to take out, hard to put back.
— Earl Wilson
Successful Money Management DONT's
- Don’t get trapped in promotional offers and buy products because there is a sale, even if they are not of immediate need.
- Don’t go shopping if you left your coupons and vouchers at home
- Don’t enter the store without a list.
- Don’t forget to pay the credit card installments monthly.
- Don’t forget each cent counts – As I always say: even the ocean is made of drops.
How Much Do You Need To Save?
Estimate an amount needed to achieve each of them, and calculate how much you need to save each month to reach that goal. For example, if you want to take your family of four to Disney World in two years, you need to save about $4,000. That means that you need to set aside $167/month for the next 24 months to afford it without getting into debt to pay for it.
It’s important to figure out how much you’ll need to save per month to achieve your financial goals. Don’t be discouraged if the dollar amount is overwhelming. The important thing is to have a set of tangible financial goals to work toward.
Quarterly, review the plan. If you aren’t meeting your goals, revisit your financial budget to see if there are any areas where you can cut expenses in order to free up money for savings. In addition, use this plan to allocate any windfall amounts you may receive – from bonuses, inheritances, tax refunds, etc.
And remember, you plan should be relatively flexible, and adapt to your changing needs over the years.
The more you cut expenses, the more you are able to save.
The more you save,
The better off you are.
Have clear dreams and plan in order to reach them. You'll be amazed of the thing you can do with dedication and work toward your goals.
Stuart Miles via Freedigitalphotos.net
Needs vs. Wants
One very important step to get closer to positive cash flow is to look at all your monthly expenses and distinguish between what you really need and what you just want to have but is really not necessary.
For example, we all need food. But we really don't need to buy top brands, exotic items, or eat at restaurants often.
Identify the items that are not true needs, and look for ways to cut down on those costs. The goal is to focus on the things that really improve your quality of life, and let go the things that are just cool or flashy to have.
This will save you money on a daily basis, money that you can now apply towards your personal financial goals.
Pay Yourself First
Make sure that you plan for savings every month. Create a voice on your budget for savings and treat it like a bill. You should make pay yourself before you pay any bill, don't wait until the end of the month, because there could be nothing left. Make it an automatic transfer from your checking to your savings, every month on paycheck day. An amount of 5% of the paycheck would work, more if you can.
If you don't have one already, start working on your emergency fund. Click here to read about creating an emergency fund.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2012 Robie Benve
Comments
Robie Benve (author) from Ohio on October 25, 2013:
Hi Codebreak, congratulations on all the good changes, and happy budgeting to you! :))
Gwendolyne Black from Erwin, TN on October 23, 2013:
Great Hub! Saved it on favorites for my new house. Starting Fresh and new with Awesome ideas!! Thanks!!
Robie Benve (author) from Ohio on March 09, 2012:
Thank you all for the supporting feedback, it's good to hear that I still have it in me! (I used to work in a financial counseling program for soldier, and I LOVED it, but that was few years ago)
:)
Tim Mitchell from Escondido, CA on March 09, 2012:
Presented very well. Thorough, concise, and poignant, yet not scolding. Very nice indeed. A great read for young and old, rich and poor, and the emerging Entrepreneur. Personally taken to heart and will be used soon.
Simone Haruko Smith from San Francisco on March 09, 2012:
What an excellent introduction to responsible budgeting! I like how you've presented the importance of thinking in terms of fixed and variable expenses, short, medium, and long term finances, and wants vs. needs. Voted up and useful!
Chin chin from Philippines on March 09, 2012:
I agree that money is easy to take out, hard to put back. That's why budget planning is really essential. Thanks for putting together a great set of tips.
Audrey Hunt from Pahrump NV on March 09, 2012:
Working for myself all these years, I always had a problem with your last tip about paying yourself first.
You have given such helpful information here. Excellent hub that gets my vote up!
