How to Use the Family Budget Correctly

This question immediately suggests that it should be part of the whole family budgeting process. It is much part of the learning around setting it up, considering its usefulness, function and purpose.

Creating or setting up the budget is one thing. Sticking to it, effectively implementing, sustaining and  if actual fact, in essence ‘using’ it is the ultimate goal and achievement. That is worth celebrating. Families have different ways again to use or refer to their family budgets.

The very day the family budget actually assists you in reducing your spending and making informed smart financial decisions that is the day you do not sit back and relax, but throw all your energy back in making it even better. This is an on-going, continuous improvement exercise, experiment and undertaking of your own making, design and creation!

The family budget can:

• Assist you in handling unforeseen increases in costs and unbudgeted expenses

It is very common to get discouraged when on the family budgeting path. The minute you feel you have taken strides forward, something will happen, a setback, unexpected upset or expense, breakdown, maintenance or replacement or car, appliance, major purchase or repair and many other setbacks will occur.

In a sense it makes families more robust, responsive and adaptable. Tracking your finances makes you aware of patterns and business cycles, cost and many other factors that affect hearth and home financial life and health.  Rent increases, more expensive cigarettes or tax increases, higher gas or energy prices or increased mileage to and from work are but a few examples of these events and issues that might come up.

When faced with these challenges, problems or complexities, having your fingers on the pulse of your available resources, discretionary monies, savings, line of credit, rates, banking fees and more, will all help you make the right informed decision that is best for your family, at that time and act accordingly with diligence and confidence. You are in control of your financial situation and not the other way around. It enlightens and  empowers you to do more with less!

Unpredictable pricing and fluctuating expense are not easy to reduce in any budget. Having this variation handy, spread over a period of time, can help you plan better and anticipate sudden spikes or higher expenditure during certain months of the year.

For example, the telephone bill is higher when the teenagers are home for the summer.   Emergency, contingency and improvements are not priorities for most of us when we receive our paycheck. To ensure a steady stream of income into these categories make “saving for a rainy day” come to life and have some real impact and meaning in our financial planning.

Cutting non-essentials first is a good strategy. Alcohol, long distance phone calls, gifts, gardening and landscaping services, decorating costs, pet care needs, recreation and lottery tickets can all be good money-saving categories. The more line items you can include, in your cost reduction, the smaller the dollar-amount impact in each.

It should come as not surprise that by just cutting a little in each of these categories, families can easily save upwards of $240 per year without too much noticeable difference in their lifestyle or any major disruptions or sacrifices. If is less than1 % of your total spending, it should not really cause pain, grief or reason for worry.

Family budgets can also provide hints on how to save on non-essentials: Buying more or less of a product or service, comparison shopping for the lowers possible price, bulk and discount, sale, buying a lower-priced or no-name brand. Eliminating some gift giving (Christmas, birthdays, friends and family) is a way to save money.

Elimination of waste is another clever way to save money that is often overlooked, BUT not in the family budget. Thrown out food because too much was purchased or it spoils because at time of purchase it was not as fresh as it could have been. Spur-of-the-moment clothing purchases, too trendy, uncomfortable and not the right size perhaps?

Making an active effort to participate in the family budgeting process will carry its own rewards as well. Self-discipline and curbing your own spending will soon become second nature almost.

• Enable families to make large spending reductions in the right places at the appropriate times

Anything from a small rent increase of a couple of dollars to an all-out job-loss can impact home life and finances,  and not in a positive sense. The family budget offers you the opportunity to prepare somewhat for this, whether pro-active or responsive action follow. Flexibility and adaptability are bonuses with family budgeting.

It will spell out the reality, damage, impact, what needs to be done at the barest of minimums to get by and offer stop-gap solutions, practical and accessible, right away. It is not to say that it will have you not worrying about it! All of us will be concerned if this is our situation, but it will leave you more prepared to deals with the challenges head on and right away as opposed to wasting time wondering what to do and how bad it is.

• Protect against income reduction and inevitabilities

In the case of job loss mentioned above there are also immediate realities to consider. Financial implications are huge for family life and the pressure is on. Family budgets and informed budgeted will tell you that this tool and time spent will be worth every penny if this were ever to happen to them.

Because of the heightened awareness and familiarity with the context and content of the financial, spending and cost cutting plans and strategies, goals and savings, the family budget process and product now offer avenues to solutions rather than barriers of debt and no point of return.

Tackling normal spending categories first, reduced transportation costs, packing a lunch as opposed to having it in the cafeteria every day. Suspend all discretionary funding, move money in your accounts around to ensure liquid assets to cover basic expenses. Luxury items and recreation, sports and other leisure activities will be another category to find some budget dollars.

Maintenance and repair costs might be suspended or delayed, cost-cutting is never pleasant but the budgeting process makes it easier to know where the cushions and ‘fat’ is that can be trimmed or eaten away at, without risking heart and limb!

Other positive job-changes like promotions and relocations could also have a lot of impact. Taxes, relocation fees, buy-and-sell of homes, settling allowances, insurance, storage etc. they all add up. The family budget will help you assess your situation more clearly, leading to better decision-making and informed empowered choice.

Next article: Family Budgeting for Dealing with Debt and Debt Consolidation

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