INTRODUCTION

"The average family exists only on paper and its average budget is a fiction,
invented by statisticians for the convenience of statisticians."
Sylvia Porter
Unlike the quote provided above, seemingly reflective of general opinion
on family budgets today, we will attempt to take a much more positive approach
to budgeting, as a family oriented, user-friendly, financial management and
planning tool and life-enabler.
However, when reflecting on family budgeting and inquiring as to why not more
families are actually using it, it becomes self-evident that similar skepticism runs
rampant and deep in reality and society, even globally so.
Once you start probing family budgets, expending time and energy researching
the subject in-depth, it becomes quite clear, that most families are caught in a
vicious, almost never-ending cycle of What comes in must go out.
Most families might feel that budgeting is a futile effort, unnecessarily burdening
them with thoughts and ways, to go broke methodically and slowly, without the
creature comforts and indulgences of our human modern-day society.
Others might voice that they feel as if they are merely throwing money away, in
a never-ending and dizzying spiral of spend, spend, spend. People are getting
deeper and deeper into debt, no matter how hard they try to get out of it.
Questions are then raised : How do we stop these courses of action? How do we
change the thinking around family fiscal discipline?
Put simply, in How to set up a Family Budget, we focus in on how
to empower families to set up better, more realistic budgets, stick to them and
celebrate their successes (and learn from their failures!)
Families eventually do have a monthly surplus, see their savings start to grow,
consolidate their debt, set aside discretionary funds and personal allowances,
build their wealth and become more aware of their pro-active involvement and
responsibility regarding their lives and finances. This is when excitement builds
and fundamental thought patters as well as spending attitudes are changed.
Budgeting is seen as an accurate measurement of success when significant
behavioral transformation is taking place on the landscape of the family budget,
spending habits and financial patterns we observe over time!
Do you ever feel that you do not have enough cash at the end of the month to
pay bills, buy necessities of life? Are you barely making a dent in your credit card
debt balance, no matter how hard you try?

Here is a reality check for all of us: if we choose to spend it, it is gone for good.
We cannot spend it on anything else. Are you perhaps worried about a nest egg
for your golden years or savings for early retirement? Then you have arrived at a
source that can provide some prudent tips on how to start, finish, implement,
stick to, revise and refine a family budget.
The family budget is a dynamic process, even more so than a mere static workproduct, result, process-outcome or document. It will, can and should change
over time. It becomes a barometer of a familys fiscal circumstance, resources
and health.
Maybe budgeting is not as much about reflecting on what you cannot have, but
more about thoughts on how to stretch, invest and spend your earned dollars
more wisely. In short, it is about making your money going further.
Objectives of Family Budgeting
The objectives of family budgeting work together to help you achieve the things
you want in life, including financial prosperity. Older children will benefit from
being included in the process, as they will learn the knowledge and skills to
support themselves upon reaching adulthood. Effective family budgeting has to
account for spending that does not have receipts, such as the vending machines
at work or going to the laundromat.
IDENTIFY YOUR GOALS
Each family will have different goals, depending on your lifestyle and the cost of
living where you reside. For example, a family living in a high-priced city might
have the goal of moving to its less-expensive suburbs to find an affordable home.
Other family goals include saving for college, affording a special vacation,
planning a comfortable retirement, or starting a business.
CONTROL SPENDING
The most important component to control spending is having all family members
in agreement with the new budget. Divide the budget into fixed and flexible
categories. Fixed categories are those you cannot change, such as a housing
payment or prescription medicine. Flexible categories are those that you have at
least some control over, including groceries, utilities and entertainment. Once
the family members make a list of all spending, they can concentrate on the
objective of reducing each flexible budget category to a minimal amount. This
frees money toward achieving the goals your family identified.

DESIGN A SAVINGS AND INVESTMENT PLAN

Emergency savings should equal enough money to support your family for the
number of months your profession averages when looking for work. According to
the Bureau of Labor Statistics, 40 percent of people who lose their jobs are
unemployed more than six months before finding another job. Set an objective of
building savings as a cushion against emergencies, including loss of income. If
any of your goals will occur within one year, then include this amount as shortterm savings. Long-term investments will fund your other goals, including
retirement.
ELIMINATE DEBT
Financial prosperity will occur faster once you have eliminated debt, especially
high-interest loans and credit cards. There are two common ways of tackling
debt. One method pays extra budget money toward the highest interest debts
first, with the intention of having more of your dollars go directly toward
principal. The other method, called snowballing, entirely pays off the smallest
debt first to lower the number of creditors. This is helpful if you might lose your
job, as there will be fewer monthly payments each month should you need to cut
back to the minimum amount.
The Importance of a Family Budget
An operational budget is a plan on how family income should be spent to provide
for family needs without incurring debts or deficits. It is the parent's primary task
to prepare a family budget. However, every member must also know how the
family income is budgeted. Through budgeting, family members learn to spend
money wisely, thus, saving money which could be used for other family needs.
Resources such as time, energy, and utilities are also used well when income is
budgeted.
In budgeting one must consider the size of the family, its income, the needs of
the family and the locality where the family lives. For a budget to be workable,
income should be adequate enough to meet the prioritized needs of the family.
1.

Food In the situation where there is a baby in the family or there

are members with special conditions who need a special diet, there's also a need
for additional money to be spent for food.

2.

Shelter Does the family own the place where they live or is it only

leased? This is important to know because expenses for house repair must be
part of the monthly budget. If the family owns the property, then payment for
the real estate tax and fire insurance should be set aside yearly.
3.

Clothing Every family member has different clothing needs. His/Her

activities and family status in the family must be considered.

4. Education Tuition fees and school needs such as books and other supplies
constitute expenses that must be provided for, especially the daily school
allowances.
5. Household Operations If the family has helpers, provisions for their salaries
should be a part of the monthly budget.
6. Utilities such as water, electric and telephone services which are paid
monthly.
7. Medical and Dental Care Expenses for healthcare of the family must be
provided. Medicines properly prescribed must be always available at home for
ready use when needed.
8. Rest and Recreation The family needs rest and recreation after work and
study.
9. Savings The money saved can be used in emergency situations. It can
grow also in the form of investment.
Pointers to keep in mind when making family budget.
1. Know your income - a clear idea of just how much can be provided for family
needs.
2. Determine which expenses are fixed and which are flexible by making a list
of monthly needs.
3. Base the budget on a system of priorities.
4. Have a record of expenses.
5. Make allowances for savings.
Presentation and Data and Information
Category

Percent Annual

Monthly

age

Amount

Total Income

2000

Taxes

Net Spendable

1500

Percentages below are for percent of Net

Amount

Spendable
Net Spendable
Housing

1000

Food

300

Automobile

200

Insurance

100

Debt Repayment
Entertainment and Recreation

200

Clothing
Savings

200

Medical/Dental
Miscellaneous
School/Childcare
Investments
Average annual expenses (2012) per household in the United States are: [1]

Category

201

201

201

Change

Change

2010-

2011-

11

12

Food at home

3,624

3,838

3,921

5.9

2.2

Food away from home

2,505

2,620

2,678

4.6

2.2

Housing

16,557 16,803 16,887 1.5

0.5

Apparel and services

1,700

1,740

1,736

2.4

-0.2

Transportation

7,677

8,293

8,998

8.0

8.5

Health Care

3,157

3,313

3,556

4.9

7.3

Entertainment

2,504

2,572

2,605

2.7

1.3

Cash Contributions

1,633

1,721

1,913

5.4

11.2

5,373

5,424

5,591

0.9

3.1

Other Expenditures

3,379

3,382

3,557

0.1

5.2

Total

48,109 49,705 51,442 3.3%

Personal Insurance and

pensions

3.5%

Budgeting Basics - Conclusion

Budgeting is an important component of financial success and one that's not
difficult to implement. Let's recap what we've learned in this tutorial:

Budgeting isn't just for poor people or for times when money is tight or
your life is undergoing a major transition. Budgeting is for everyone
because it makes it easier to achieve financial goals of all shapes and
sizes, whether that goal is to stay out of debt next month or to pay cash
for a sports car.

Budgeting allows you to make long- and short-term projections about your
financial situation, prevent crises, get the most out of your money, plan for
major life changes and enjoy peace of mind.

Budgeting systems - ranging from a simple notepad and pen to online

financial management software - are available for all needs and
preferences.

Budgeting monthly, rather than by the paycheck, can help you learn to
take a longer-term view of your finances. (For related reading, see The
Beauty of Budgeting.)

Keep track of all your expenses, not just the big ones. Those daily lattes
can add up!

Getting a basic sense of your financial picture is an important component

of budgeting. Make sure you know how much you make after taxes and
how your required and optional expenses fit into that picture.

Being flexible with your budget categories and allowing yourself affordable
rewards will prevent budgeting from being a drag and help you stick with
it.

A well-maintained budget can help you meet short-term goals, like saving
for a vacation, as well as long-term goals, like saving for retirement.

Avoid budgeting mistakes like being so frugal it makes you miserable or

ignoring the time value of money. Since you've already learned about
these and other common budgeting mistakes and how to correct them,
you probably won't make them. If you do mess up, remember that you're
only human. Forgive yourself, correct the mistake if possible and vow to do
better going forward. (For more, read Get Your Budget In Fighting Shape.)

A budget should evolve as your circumstances change. Don't expect the

budget you made at 25 to still work for you at 35 or even 27. Your income
and expenses will change over time, often annually. For example, if you
get a raise, you'll want to adjust your budget to reflect how you want to
spend or save the extra money.

As long as you're spending within your means each month, a budget is a great
tool for helping you sleep soundly at night. You know where your money's going,
you know that you're on track to meet your financial goals and you know that
you've planned to weather the storms that will arise from time to time. If your
spending is too high for your income, a budget serves as a pesky but necessary
reminder that you need to change things - and the sooner you listen to those
irksome numbers, the better off you'll be. Living paycheck to paycheck only
works temporarily - sooner or later you will have an expense you can't meet or a
goal you can't achieve if you don't learn how to budget.