Managing Finances

With the recent financial difficulties in the world, more and more families are once again turning to family budgets to help them plan their finances. As most people already know, a budget is a financial plan that tracks income and expenses – money coming into the household, and money going out. A properly formulated budget can go a long way toward helping a family more successfully manage their household expenses and plan for their future financial stability.

Before you begin to plan your budget, track and review your expenditures for the last several months to get a general idea of where your money goes. Once you have gathered that information, you can begin to prepare your budget. As you do so, here are seven tips to make the budget process work for you.

1. Check your attitude. As with most things in life, your attitude toward money is the most important element to successful money management. If you are one of those people who feel a burning need to spend money as soon as it hits your hand, changing your attitude toward money may be the most difficult challenge you will have to overcome as you work to develop an effective budget. Recognize up front that there may be unnecessary wants that you will have to sacrifice as you balance your income and expenditures.

2. Commit your budget to paper. Having a written plan will help you to commit to the idea of a budget, and will provide you with the information you need to follow through on your budgeting plans. List your income and planned expenses in a ledger book, on a weekly or monthly basis. Try to be as accurate and honest with yourself as you can, and list every expense – no matter how insignificant it may seem. After all, two or three dollars a day spent on snacks or soda at work may not seem like much when viewed on a daily basis, but those minor daily expenditures can add up to as much as ninety dollars a month.

3. Needs and wants: learn the difference. Needs are essential, and cannot be avoided. As a general rule, anything that you can do without is a want – not a need. In the initial formulation of your budget, include only income and necessary expenses. List all of your unnecessary expenses separately, so that you have an accurate picture of your true financial situation. Remember, your true financial situation is the balance between your income and your necessary expenses. Once you have determined that balance, you will be able to see how much discretionary income you have available for your wants.

4. Plan your shopping trips. One of the most common pitfalls to good budgeting is the tendency some people have to make repeated, unplanned trips to supermarkets and other stores. When you are picking up the kids from school or soccer practice, resist the impulse to make an unplanned stop at the grocery store, or your local Wal-Mart. Limiting the frequency of shopping trips will enable you to avoid those impulse buys that often result in the purchase of unnecessary items.

5. Make a grocery list. This is such a simple and time-tested practice that it seems almost too easy – but it really will save you money and help you stay within your budget. Plan your food needs for the week, pay period, or month, and purchase as much as you can in bulk. Stick to your list and your shopping plan as much as possible, and avoid “extra” trips to the grocery store. As a rule, try to remember that any item that you forget to put on your list is probably not critical.

6. Evaluate your purchases. The next time you see an advertisement for some new product, consider carefully before you rush out to buy it. Too many of us have become programmed consumers who fail to evaluate the necessity of the things we buy. Buying whatever catches your eye can be a hard habit to break, but it is crucial to do so if you want to learn to live within a well-established budget. If you give some thought to each purchase before you commit to buying it, you will often find that many of the things you consider buying are either completely unnecessary, or are redundant purchases that add nothing to your enjoyment of life.

7. Rediscover frugality. “Beware of little expenses. A small leak will sink a great ship” was one of Benjamin Franklin's best pieces of advice. Being frugal often seems to be a lost art in the modern age of excess and instant gratification, but it is one of the truest paths to financial stability. After all, while you cannot always control how much you earn, you can always control your unnecessary expenses.

These seven tips, though seemingly simple, can help you to focus your mindset and your behavior on creating and adhering to a family budget that effectively balances your means with your family's wants and needs. Applying these tips, and following through on your budget plan will enable you and your family to begin to control your family financial balance sheet, and achieve greater financial stability within your home.

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