Why A Family Budget Is So Important
by Carmen.
Date: 8 January 2010
All businesses have a focal point and this is their budgets. Without them, businesses can not go very far.
Planning ahead and having complete control on their finances is vital for their survival.
Why in families is it different?
Of course families are not financial institutions, but without a basic financial knowledge and a basic budget as businesses, families can also go burst with even worse consequences than businesses.
What is a Budget?
A budget is a sum of money designated to cover a particular purpose. It is a list of expenditures and income for a period of time.
It is nothing more than a plan on how you are going to spend the money you earn in an organized and smart way.
Why budget?
The main reason to have a family budget is to avoid financial disorganization which leads to serious money problems. Being organized with money will allow you have more fun and enjoy life more. Other reasons for budgeting are to:
- · Be prepared to avoid surprises
- · Save money to buy something
- · Get out of debts
- · Get out of the vicious cycle of spend now and pay later
- · Rediscover that having fun can be FREE
- · Be financially comfortable
How to budget?
The first thing you need to do is develop a deep awareness about how you deal with money, and to see it in a crystal clear way is to write down on paper, all the money you bring home (income) and all the money you pay out (expenses).
Make a list of all your income as a family then make a list of all your expenses. It might take sometime until you finish your list and the reason why is that we always have a lot more expenses that we can remember.
So don’t think you are going to do it in 15 minutes. Keep the list open for a whole month and keep entering your expenses as it happens.
Try to keep records of everything: coffees, tips, drinks and every little expense you make each month.
After the month has ended add up all your expenses and all your family income to have a clear idea how and why your money is going so quickly. Now you have to start making the cuts in your expenses if you are not happy with the results.
This is a really simple strategy to start to get you and your family out of debt. You have to be persistent and have the will power to continue until you get the results you want.
Consequences of denial
If you always avoid facing and managing your finances properly you will regret it later on. Some of the consequences are:
- · Live constantly in debts and under constant stress
- · Bankruptcy
- · Serious conflicts in your family
- · Repossession
- · Cause grief to your children
Alternative Route
If you are already in great financial difficulty and you own your own home, you can still make it. Re-mortgage is a great opportunity for you to pay all your debts without having to go through the painful route of bankruptcy.
What ever you do always seek sound finantial advice from authorised agents.
