Rules of Thumb for Creating a Budget
No government can ever cope without a budget. No business can function without a budget. No professional organization or non-profit could exist without a budget. So why should a family be any different?
There are so many ways in which having a budget and a getting the entire family to sign up to it will make everyone’s life so much easier and free from stress.
Create a Smart Budget
The basic strategy for any budget, be it nationwide or the most humble, must always be that you budget income low and expenditure high, in other words a very conservative approach.
On the understanding that you don’t intend trying to spend more than you earn, using that approach should mean that having built in room for emergencies and contingencies you shouldn’t find yourself in a state of panic when there’s nothing left in your wallet.
Make Your Budget a Family Affair
The first rule of thumb is the basic starting point – everyone involved has to be involved. That means father, mother, children, and anyone else who is affected all agreeing that action has to be taken.
Decisions on family budgeting invariably mean sacrifices of one kind or another and there will only be recriminations and unwillingness if there is lack of consultation.
List All Expenses
The next absolute rule for saving money is to know how much money you are spending. This is quite a complicated task but must be faced as it is central to the success of the entire budget process.
If you look on the Internet, there are any number of sites which will provide you with the software that will let you enter the expenditure under all the different headings. You will need to go through all your bills, not forgetting those which only arrive via email. Then you need to conduct a month-long experiment – buy yourself a little pocket exercise book and every time you spend something, write it down.
Fine Tune Your Budget on a Monthly Basis
After the month you will have the starting information for the process of building the budget. But it will need to be modified as the year progresses and seasonal variations are built in.
Eventually you come to a total and measure t against your income. If you are lucky the figures will balance but even then you shouldn’t feel too comfortable because you would be very well advised to build in at least a 10% contingency fund to protect your budget against the unexpected – which almost always occurs!
Unfortunately for most of us, there’s going to be a gap that needs bridging (especially if you allow the contingency which we strongly recommend) and that is where you have to meet together to decide the priorities for saving money.
Creating a Budget with a Personal Budget Spreadsheet (Download)
Cut Out the Waste
Here’s a few suggestions: if anyone still smokes, cut down or even better cut it out, thousands of dollars can be saved that way; eliminate impulse shopping at the supermarket by phoning in your order or using the Internet.
But a good honest all family discussion should come up with lots of ideas for saving money – you could even have a competition for who comes up with the best ideas.
Category: Budget
