Budgeting is a family affair.

 

Arriving at a sensible family budget is not always easy.  However, it is  a more preferred option than getting into debt or simply living from paycheck to paycheck.  The task of budgeting in a family may be assigned to a specific family member but this does not mean that he or she is the only one responsible for making it work.

What is Budget?

Personal or family budget is a financial plan that seeks to match income with expenses with the intent of making ends meet or better yet produce surplus in the form of savings and investment.  It is actually a very simple tool of providing a clear path to follow in monitoring where money inflow goes to.  A budget makes it possible for individuals, families, and businesses to make sound fiscal decisions.

The existence of a well thought-of and sensible family budget makes it easier for families to live within their means.  With every income and expense accounted for, it would be easy to see if there is any amount left to be used for non-essential wants.  Obviously, where there is no surplus, families will have to postpone getting these non-essentials until such time that the budget would allow it.

Needs vs Wants

It is said that when one knows how to distinguish between needs and wants, he or she is able to spend less.  Needs are made up of four basic things – food, clothing, shelter, and medical care. All the other things are technically wants.

So technically speaking, when everything is down to bare basics, these four are what are needed to survive.  Mere survival however is not the object of human living.  Therefore, it is necessary to incorporate certain wants to make life more fruitful.  The most justifiable want is probably education since it is generally needed to obtain gainful employment.  Others like recreation, travel, and a car may have to wait further down the line until such time that they can clearly be afforded.

Qualifying Needs and Wants

There is a need to qualify needs and wants specifically as to their nature.  Which is a more justifiable expense – occasional family eat-out or branded clothes, a family car or a vacation house, master’s degree program or aesthetic surgery, a yearly family vacation or frequent dining in fancy restaurants?  Clearly, the basic necessities in their non-essential levels can become secondary to important wants.  It all boils down to the purpose and the beneficiary/ies of the expense.

The more people that can derive good from the expense, the more justifiable it becomes.  The more an expense can ensure improvement of over-all family condition, the more efforts can be exerted in ensuring that the budget will make room for it. This then brings us to the main concern of coming up with a sensible family budget that will consider the particular circumstances of a family.

How to Budget

There is not one specific budget style that will work for all families.  The differences in the amount of income and the possible expenses between make it impossible.  However, the general rule is always not to spend beyond what one earns.  This is fairly simple to understand because going against such rule will surely result to deficit.

A family budget needs to written.  It cannot be done by memory since there will always be a tendency to overspend when one or two important expense items are forgotten and the intended earmarked amount is spent on other unplanned things.  There is no question about setting aside specific amounts for essential expenses such as mortgage/rent, tuition fee, utilities, insurance, gasoline and groceries, among others.  Families will have to think twice or many times over though for non-essential purchases.

My Say

Parents typically take the lead in budget management.  It is wise however, to involve older children in decision-making specifically in matters that involve them.  Family members need to cooperate to make a budget work and this can be achieved if everyone understands that limited resources will have to be allocated properly  Families can arrive at a sensible family budget with honest assessment and some serious pencil-pushing.