(Continued from Part II.)
Now let’s look at how to start organizing your family budget.
THE FAMILY BUDGET
If you have a spouse or a significant other, you should make this budget together. Sit down and figure out what you are spending money on both collectively and together to run your household. If there is a lot of fat that needs to be trimmed, try to take it a step at a time. Remember, there is no blame involved, it is just looking at the cold hard facts.
Often just looking at them is to see a problem, and once you see it, you can start to work together to come up with a solution.
SHORT TERM AND LONG TERM FINANCIAL GOALS
The next step is to discuss joint financial goals are in both the short and long term. Car, vacation, house, kids, college, retirement, these are pretty standard goals for most people. You may have other personal goals too, like going to grad school, having to pay off student loans, and so on.
Whatever the goals are, the first step is to identify them. That way you can plan your route to get to those goals.
Every journey begins with a single step, so the first step to attaining your goals is to make a realistic budget that you, or you and your partner, can live with.
NO STARVATION RATIONS
A budget should never be a financial starvation diet. That won’t work for the long term any more than living on lettuce for three months to trim the fat would work. All you will do is get sick of it, and binge.
So, be honest, and realistic. The rate of inflation is about 5%, so make reasonable allocations for food, clothing, shelter, utilities and insurance and then add on 5% for a bit of wiggle room.
Set aside a reasonable amount for entertainment and the occasional treat. If you want a vacation, set aside a certain amount each month, but be clear it will have to come out of your budget, and not from a credit card or at the expense of other crucial items.
Continued in: A Budget: Your Ultimate Financial Management Tool, Part IV
