Since an Interim Budget of our country is due today i.e.17th February,2014, we will be watching and even discussing lot on country’s budget and it’s pros and cons and what should have been done and what should not have been done and the cause and effect of the same.
While worldwide all country’s prepare and present budget, but it has been found that only very few percentage of household family’s do Budgeting. While we all live on, have our own set of income, expenses and responsibilities, it is fatal not to prepare a budget (in Writing, incomes , expenses on paper). In India the percentage of household family actually writing income and expenses on paper is still very low. Some Family member may be writing their daily expenses in a book, but for me that is very little work done.
Having a family can be a huge responsibility. There are countless things that must be taken care of everyday and the safety and security of said family is foremost in the mind. That is why it is so important for a personal family budget to be in place. The financial area of your life as it pertains to the family is the deciding point between happiness and extreme stress. Those who fail to use a family budgeting system often end up with family problems and worse yet, devastating financial losses, all of which could have been prevented with a bit of planning.
The family budget is really nothing more than a listing of the expenses and incoming monies on month to month basis. While some people believe that the budget must be a complicated mess of numbers and accounting practices, the common person will find that simplicity is the best method. So the first rule of the family budget should most certainly be to keep it simple.
Budgets carry the stigma of cutbacks and no spending on fun items. A family budget serves as a useful tool for families, regardless of income level. A budget may actually free money and assist in targeting the money on more useful items. Budgeting is an important component of financial success and one that's not difficult to implement.
Following are top 6 Reasons why a family should sit together and discuss,prepare budget and reassess the same at regular intervals-
A family budget allows the analysis of the family's money and how it is spent. The exercise of identifying spending habits reveals trends and money wasters. Small amounts of money add up quickly, creating a drain on the bank account if the items purchased are not necessities. Identifying the items on which money is spent is a key when establishing a family budget. Families often find themselves surprised when they explore where the money goes each month and from my short but great financial planning experience I can vouch that putting things on paper makes a huge difference, especially sitting together with all family members. One can even allot Percentages to each expense, to ascertain what percentage of total expenses goes where.
2 Predict Spending
A family budget provides a tool to predict future spending. Foreshadowing expenses and spending trends allows the family to plan for upcoming events or unexpected expenses that inevitably arise. A review of the budget periodically allows the family to adjust spending based on previous months. The budget also allows the family to identify areas that can be cut when unexpected expenses do arise.
Also some expenses are done on monthly basis, some on bi-monthly basis, some quarterly basis ….and so putting on paper helps a lot to track and predict what comes next. And on the top of it, if followed rigorously even for some time by family, there would be no reminder needed for any of the future expense.
Consumer debt hampers many families, holding them back from financial freedom. A family budget helps control spending which allows extra money to go toward paying off debt. Setting budget ensures that all credit cards and other forms of debt are paid on time each month,avoiding late fees and penalties. Extra money in the budget may also be set aside to aggressively pay off outstanding debt. This eventually frees more money to apply toward other areas of the budget, including a family savings account.
4. Increase Savings
The savings account often falls neglected without a family budget. Small splurges eat away at any extra money in the bank account which could go towards savings. A family budget allows a percentage of the income to go toward a savings account or other investment options. Building the savings into the budget ensures the money makes it into the savings account before it is spent on other things, it also throws up actual surpluses left on each regular interval, which helps for either future expense or saving.
5. Teach Financial Responsibility
Implementing a family budget sets a strong example for children. Financial responsibility begins at an early age, well before a child is old enough for a check book or a credit card. The responsible approach of creating a budget instills the value of money and responsible spending in the entire family. While they don't need to know every detail of the family's financial situation, understanding that spending money needs to be planned is a good lesson for kids to learn.
6. Creates a Common Vision for Family
Doing this activity on regular basis has its indirect advantages for the family. It creates a sample vision for the family and each member keeps tracking it somewhere, and on a regular basis the family sits together. GREATEST ADVANTAGE…..
So traditionally it is said.
“Family that eats together, stays together”
The improved latest version says,
“Family that discusses and prepares budget together, stays and grows together”