The term budget has unjustly earned a bad reputation. Without fear of contraction, I can say that anyone who does not live on a budget is not handling his finances efficiently, especially those people who think they don't need one. It's better to live on a budget and know where your money is going every month than to live without one and not know. A good budget does not restrict your freedom. It merely tells you when you have spent what you have agreed you can spend.
Who Needs A Budget?
Most of the women in our practice holds the budget in the family. And initially they said "Oh, I know what a budget is. It's a plan where the husband gets to punish his wife." Ah! ah! LOL . . .That is not the purpose of a budget. The purpose of a budget is for a husband and wife to communicate how they're going to spend THEIR money, and then to have a guide to measure whether or not they're spending their money the way they have agreed they would. Many people think they have a budget, but in reality what they have is a detailed spending record. The only control they have over their spending is to balance in their checkbook. Obviously, that's better than borrowing to make up for overspending. But it is not a budget.
Developing a budget means more than just writing figures down on a piece of paper. It means sitting down and talking about your current situation, where you need to go, and constructively evaluating how you are going to get there. If you have children old enough to understand, they can be included in your budget discussion.
Here's The Steps In Developing A Family Budget
Step 1. List all the available income. Divide it into income per month.
- Salary
- Rents
- Notes Receivable
- Interest Income
- Dividends Income
- Income Tax Refund
- Any other income
A. Variable Expenses
- Food
- Outstanding debts
- Utilities
- Insurance (life, health, auto, etc.)
- Entertainment and recreation
- Clothing allowance
- Medical and dental care
- Savings
- Miscellaneous
- Tithe
- Federal and state income tax (if this is already a salary deduction ignore this item)
- Social Security taxes (treat the same as income taxes)
- Housing expenses (payment/rent)
- Residence taxes
- Residence Insurance
- Other expenses that are fixed every month: car payments, payments to support family members or any other expense that is predictable and the same each month.
Step 3. Compare the categories that you're just noted as income versus expenses exceed income, you must evaluate every category to decide whether or not you are overspending and, it if so, how spending can be reduced. If your income exceeds your total expenses, you then have only to implement a plan that will help you meet your financial goals.
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