In these economic times, practically no one has the luxury anymore of joking “I can’t be broke – I still have checks left!” Managing your money is a necessity. Unfortunately, all of the information out about how to set up a budget almost always ignores the most important point: the purpose of the budget. Family budgeting has a purpose. That is either to stop or redirect spending, or to force savings. If your budget is not doing one of these two things, your budget isn’t really doing anything except increasing your stress. And no stress management system can fight against that.
1. Stopping or redirecting spending. Too many families know that their spending is out of control. But they have no idea how they are spending their money. Consequently, they have no idea where to cut back. So a budget that is focused on your spending must do the following:
a. Track your spending for at least one month by specific categories. “Miscellaneous” is not a category.
b. Prioritize the categories by need, not by want.
c. Plan out your budget for each month based on the new priorities.
d. Stick to the budget.
e. Track your credit card spending and ATM withdrawals. These are budget killers.
2. Forced savings. For many families, savings comes last. They may be able to follow a budget, but not many budgets have a category for savings. The savings can be general, like an emergency fund or just a cushion. It can be for a specific purpose, like college for the kids or retirement or a vacation. This article is not on financial planning, so we cannot tell you the best method of savings and investing. But a budget that is focused on savings has money going into the savings category first. This type of budget also requires prioritizing the cashflow, but it puts the savings category as the top priority. It also may have some more flexibility, however. If the savings method chosen is aggressively growing, then you may have some months where the savings accounts don’t require so much input.
Setting up a personal financial budget in this manner can also reduce some of the stress on the family. If your family is constantly arguing over money or fighting over one or both spouse’s long hours at work or missing out on activities with the children because of money considerations, then strictly following a budget may relieve some of this. An overall stress management system should include emphasis on managing finances.
Failing to control your family finances will only lead to more of the same pain. Setting up a budget is a start. But if the budget is unfocused, then you will be fighting yourself each month to follow it. Worse would be a budget where no one knows the priorities or not everyone had input into deciding the priorities. The problem here is that, without each family member being invested in the prioritization of the budget, they are far more likely to fall to temptation to spend outside the budget.
Family budgeting may seem like one of those chores that no one wants to do. People are reluctant to discuss money with their families, and sometimes even their spouse. But it can be used to teach children how to manage money. And it is fascinating, and brings people closer together, to hear each person’s priorities and thereby their goals and dreams. Take some time and create your family budget right. And you just may be creating your family right as a result.
Rick Carter created STRESS JUDO COACHING, aggressive stress management coaching for maximum personal effectiveness, based on his 17+ years of experienced in the courtroom and 25+ years of experience in the dojo (martial arts school). Rick is a certified coach and attorney licensed in 3 states. If you want to develop the mindset of a black belt martial artist toward stressful situations, go to STRESS JUDO COACHING.