The family budget is the base on which financial success is often built.
If funds are limited we are required to prioritise our spending - to differentiate between those things we must spend on and those things that are a matter of choice.
Wants versus needs; spend now versus spend later.
Often, we live to the level of income that we earn. Even high-income earners are not immune to cash flow problems and an inability to save.
Successful businesses are those that plan for the future and so it is with the family budget.
Unfortunately, budgeting is something that a significant proportion of us identify with failure. There is little doubt, however, that for those who plan upcoming expenditure, who set future financial goals, and who show persistence significant financial improvements can be made.
Family budgeting should not be equated with hardship or a lowering of the family standard of living. The intention is merely that funds are spent more effectively and that areas of waste are eliminated.
I am reminded of friends of mine who had an overseas holiday. They planned the holiday and then saved the funds. With a specific goal in place, they were surprised at how quickly they were able to save the required funds from a budget that had previously been fully spoken for.
The starting point for a budget is to analyse your current spending patterns. Knowing how you have spent your income over the last year provides a good base for making decisions for next year.
In preparing a budget be realistic. Harsh budgets, like harsh diets, are unlikely to be persevered with (and therefore to be successful).
You should allow for contingencies. Life doesn’t just unfold in a logical manner with no surprises.
Look also at your use of credit cards. Many people only use credit cards as emergency funds.
One good budgeting method I have seen is to plan your budget on the basis that your bank account is divided into several different parts.
Whether you can buy that jacket will depend on whether that part of your bank account has sufficient funds in it. It may be that the bank account itself has more than enough funds in it but these will belong to other areas such as food and transport.
A good financial plan will also include an allowance for appropriate insurances and a regular investment amount.
Budgets for family spending may seem onerous but the results are worthwhile.
