If you’re wondering why family budget planning doesn’t any longer exist in our society, or why most families fail at it, then you should know there’s only one reason for that: skepticism – very few or no family believes it will work.
Some even see it as an unnecessary measure aimed at making life boring and not worth living for them. Because they believe planning their expenses and incomes will deny them the freedom they use to have with spending on luxuries and also restrict them in their indulgences.
While so many families are skeptical about the effectiveness of budgeting in curbing their extravagant spending, many are not comfortable with having to spend and spend but not sure how to go about it. This spiral spending has led so many families into a big debt and now they’re in search of a way out.
Luckily there’s an option to be had: embrace family fiscal discipline, which I put as: setting up a family budget plan.
So you’ve got the solution now, but the big question is how do you go about it?
Don’t panic, I have your back already!
First let’s start by what to expect in this article.
In this article, you’ll learn about:
- What’s a family budget?
- What Budgeting Is not?
- Effective Family Budget Planning Processes to Manage Your Cash
- How to Define Your Financial Worth In Family Budget Planning
- The 5W’s of Family Budget Planning You Need to Know
- Why Do Many family Budgets Planning Fail?
- Steps to Set up Realistic Family Budget Plan
What’s a family budget?
Is your meaning of family budget something like this:
For money earned, money comes in; and for money spent, money goes out?
If this is your understanding or definition of budget, I’m sorry there’s more to it than that.
To cut long story short, here’s what family budget means:
“A family budget is a statement which shows how family income is spent on various items of expenditure on necessaries, comforts, luxuries, and other cultural wants. It shows the distribution of the family income over the various items of expenditure.” – EconomicsDiscussion.net
What Budgeting Isn’t Really Is?
What many people think of budgeting is that it limits their spending and makes them live a low-key lifestyle. But it’s more than that: it entails things such as informed decisions, wisdom, and so many other things like that, which has to do with your household fiscal planning.
As you already know, there are a thousand and one factors that drive our spending urges. Things like value, need, choice and preferences are some of what will likely determine how you spend your income. For some, it could be clothes, and for others it’s having a nice time at a restaurant.
If you observe your spending on these things is going to the roof, then it’s time to make an adjustment.
It’s not really an act of extravagance spending on something you desire, but you only need to be able to set a dichotomy between informed buying decisions and just spending on foolish impulses.
The question, yet, is what actually is budgeting or goal of family budgeting?
Family budgeting aimed at achieving the following:
- Reducing cost,
- Having control over your spending, and
- Imbibing the spirit of saving, creating more wealth and liquid assets over time.
Effective Family Budget Planning Processes to Manage Your Cash
For most families, their fiscal trend looks something like this:
Having a fixed income while expenditure goes up over time, as the family needs continue to grow or change. No any attempt to keep a budget or try to work on increasing the income sources.
Also, many families are struggling with months of unsettled debts and they’re wallowing in it, while at the same time struggling to get out of it.
The whole issue borders on how you manage your cash. You see, it really doesn’t matter what you spend the money on at times, but what does is how are you able to keep a tab on where the money goes or even set up a budget for it.
Now, as you’re ready to make a change, where is the good place to get started monitoring your expenses?
First, go back to your fiscal situations; critically assess your current financial life and circumstance. You might think you already know these, but I bet you don’t.
And, until you thread this part of analyzing your financial situations by starting to look at things such as your financial worth, goals, and measures to reach the goals of where you want to be financially, you may never get out of financial epilepsy.
If you’re following me you most likely already know what that sounds like – an action plan.
Yes, you’re very correct. But where do you get started from?
The best way to begin with managing your cash is from your bank statements. And then you move to your tax return and current credit report.
The whole idea is, you can’t get to your financial dream destination if you fail to figure out where you’re at present, what processes are required to get to where you want to be and the blueprint to get there.
All these summed up, there’s only one thing you need to reach there: a well-planned and realistic budget.
And that’s all you need to ease your arrival at your financial destination.
And to get started with the process, you need to answer:
How to Define Your Financial Worth In Family Budget Planning
What’s your own definition of financial worth?
Do you ever think knowing this matters in getting started with your budget planning?
Do you value your current financial status in terms of cash in the bank, checking accounts, savings- investment portfolio, and stocks?
Before you jump into a conclusion, remember you need to take into an account anything that has value. Things like your assets also count here, don’t forget.
So, there are many factors to consider while planning your budget: your net monthly pay (that’s pay after deductions), mode of payment (whether weekly, bi-weekly, or monthly) and other sources of income.
Once you know all these, then you can go ahead and budget appropriately.
The 5W’s of Family Budget Planning You Need To Know About
Since families are different and unique in their own ways, it’s just normal that you consider your own family peculiar fiscal nature before starting to plan your budget.
And that brings us to the 5W’s of family budgeting, which comes handy in looking at different natures of family income sources.
So let’s dive into it…
This is where questions as to the “Who” you’re as an income earner needs to be answered. Whether you’re a single-parent, work-at-home mom, single-income person, or divorced household, there’s definitely a process that fits you.
The “What” aspect helps you list expenses in different needs categories. And here, you could have your expenses categorized into:
Obligations: Things you’re under obligation to satisfy such as insurance, home mortgage or rent, tuition, home, loans, bank interest and fees, taxes, and lots more.
Miscellaneous Expenses: Under here, you have expenses like snacks, coffee, newspapers, postages, magazines, lunch at work, etc.
Necessities: These include things such as gas, utilities, and school lunches for your children, household supplies, groceries, foods, water, car maintenance, internet services, housekeeper, etc.
Family Allowances: Under this category, you have expenses like home improvements, parties, subscriptions, movies, weekend outing, furniture, etc.
Personal Allowances: Here, you have items such as hobbies, clothing, night outing with a friend, sports or recreations, donations, shoe repair or changing, gardening, laptop, etc.
When and Where?
The “Where” and “When” talk about the best place and time to start your family budget, respectively. If I were you, the best answers to that are here and now.
So get started with your family budgeting now. Since we’re talking about your family future and life here, I think there’s no need whatsoever for procrastination.
This is the last of the 5W’s of family budgeting. It talks about why budgeting.
And, here are the reasons why you need a family budget:
- To have control over your family spending.
- For better preparation about future unexpected financial needs.
- To plan ahead of key purchases.
- To avoid excess spending and debt.
- To have a better lifestyle(s).
- To help plan for your retirement.
- To avoid having a mental problem with money issues.
- To regain your self-dependence from loans/debts.
Why Do Many Family Budgets Planning Fail?
Most families fail in their family budget planning just before they even begin. To some, they already see budgeting as a futile effort right from the outset and so anything they do get stuck because of the wrong mindset they bring into the process.
Others failed for lacking the power of clarity as to how the whole things work. So, it’s important you know what reasons can account for your budget failure before embarking on it.
Here are the reasons for family budget failure:
Lack of Positive Attitude – This is the number one reason many families don’t even embark on a family budget from the beginning. And for this reason, when such families do eventually try planning their family budget, the result sucks.
You need to ask yourself this question to see if you’re one of those people with a negative attitude about family budget planning:
How do you see budgeting?
If your answers are anything like financial restrictions, financial diet, a sacrifice, etc, you’re no doubt having a negative mindset already. And to succeed in family budget planning, you have to change that.
But I need to tell you that I don’t believe you have this kind of attitude and so success is guaranteed for you.
So you should think of a budget as a means of achieving your financial freedom and sufficiency – your financial dream.
Wrong Motivation – why are you planning a budget? Is it to placate yourself or your nagging spouse? Are you under pressure to fulfill any financial obligation such as debt or abiding by a bankruptcy court decision?
If any of these is what motivates you to want to plan a family budget, you may fail. Not because they’re bad motivational factors but because they’re externally generated motivations. And, as such, they tend to be difficult to maintain over time.
But, what you need is internally generated motivations – such as the strong belief that budgeting can help you reach your financial goals.
Unrealistic Dreams or Goals – Setting up a budget, in itself, requires having realistic expectations or goals. If you’re setting a budget on too-big-to-achieve expectations, then you should drop it now.
You shouldn’t go into budgeting because you’re looking to get rich quickly or thinking of changing your spending habit quickly or in an unimaginable way.
Budgeting is only a self-discipline event that only those who persevere will come out in flying color.
So get all these points right from the beginning so you can succeed in your family budgeting.
Steps to Set Up Realistic Family Budget Plan
Now that you understand what factors might mitigate your budget success, what are the steps you can follow to make sure you have a realistic family budget?
Here are the 5 steps you need to succeed while setting up your family budget plan:
Step #1: Define your monthly take-home pay
Step #2: Define your expenses
Step #3: Figure out what goes to each of the expense you make
Step #4: Match your monthly expenses against your monthly take-home pay. Do they match?
Step #5: Decide on a balanced budget. This simply implies that in setting your family budget plan, there must be a balance or a match between your spending and your income. Except you’re not ready to stay out of debt, you’ll need to cut down your expenses till it matches your monthly take-home pay.
Except you’re not ready to stay out of debt, you’ll need to cut down your expenses till it matches your monthly take-home pay.
I believe by now you’ve learned a lot about family budget planning but you really need to read again and follow everything in this guide. If you can follow these simple and easy steps laid out above, you should be able to become better at setting up a realistic family budget plan in less than 10 minutes.
These are the same tricks that have worked for me and many budget experts; you should never relent to implement everything in the piece.
Now your turn! I’ll like to know what your own take on setting a budget is. Kindly share your thought in the comment box below!
Thanks for reading!!!