Before Planning & Buying, Really Think! On an ongoing basis during the budget process ask yourself: ‘Do I really need this?, Is this an impulse buy?, What can I do to fix what I already have, or do I just want something new?’ Regarding the latest video game many spend a lot of money on the newest game, and get tired of it a week or two later, so how about renting? Keep in mind some things like buying the daily java fix may seem insignificant, they can really add up, and up, and up! The bottom-line is, by establishing an affordable budget, and a good pattern of savings you won’t see “Red.” Also a pattern of savings with little insignificant things will help you with the decisions with larger ones.
Liken the family budget to an incorporated business. Why do we say this, well like a business it is crucial to have structure giving all members responsibility to play a role in the success of the family. Set aside some time each week to meet with members of the family, so you’re all contributing to its success. Remember, a business is only as good as their employees. Start your young ones (recommend ten years old +) to manage their own simple budget preparing them for adulthood to help them avoid the pitfalls many eighteen year olds start to find themselves in – DEBT. In the end the business units can not sustain themselves without the help from the umbrella corporation, so in a family there is no option for a unit to fail.
Practical Suggestions as follows:
1. Write down as best as possible your essential monthly expenses that are fixed (e.g., rent, mortgage, taxes, car insurance), and those that are variable expenses (e.g. utilities, credit cards, food) and the like. Try to make a monthly estimation of the previous year’s bills dividing by 12. The last column in the spreadsheet as the average expenses per month formula. A written budget to review throughout the year is the key to relieving much family anxiety.
2. Record expenses into the organized categories. The spreadsheet is broken down into categories starting with the net estimated revenue, and followed by estimated expenses such as taxes, housing, travel, home costs, and so on.
3. Estimate how much of your revenue should be applied monthly to each line item in the category. With bills paid annually, like homeowners insurance, you must “calculate” how much needs to be put aside each month.
4. In the top category “Net Income, Revenue & Fees write down the amount you expect to make in each category. The expenses will be subtracted from the income and revenue letting you know if your meeting your budget, and when you go over budget which is indicated as a “RED” number in the bottom row “Net Income / Net Margin.”
5. Be sure to set aside monthly the amount needed to satisfy each line item in each category. For those using cash, simply make envelopes for each category. Then place the amount of cash you need to cover the designated expense. For important monthly expenses like rent or mortgage, renters or homeowners insurance, and property taxes not escrowed by a bank simple open up a connecting savings account and designate it as “Escrow”. This is done due to the fact that expenses like property taxes, renters or homeowners insurance are paid quarterly and annually.
6. Structure your budget so there is money for savings. In “Family Funds, Child Support and Reserves” determine the amount you can put in each month in “Owners Reserve” with an objective of 10% of revenue. It is recommended that this reserve be placed in and account that is separate from your checking account, so a good place would be a retirement fund or certificate of deposit. Of course, this will only work if you have the ability to meet your monthly budget.
Credit Warning: Your credit card if applicable should only be used on items your have budget. Irresponsible use has been for ig ticket impulse buys. Remember if you do not have the money you don’t buy it, because credit card revolving debt can incur up to 22% in interest payments in effect costing you much more for anything you may be buying. Many budget plans have been broken by the temptation to “buy now, pay later.”
• Careful Planning is recommended. Prior to any purchase or project carefully calculate the expense to determine if you’ll have enough to afford it, and subsequently maintain it. Creating a budget helps you live in your means, and avoid the pitfalls of falling into debt. Follow the budget spreadsheet to designate your specific amounts to apply to present and future expenses.
• A Good Picture Brings Enlightenment. When you organize your expenses well, you can see where your money is going and more importantly where what expenses you can erase from the picture (e.g., in the line item “Restaurants…” you’ll see if you go out too much, or spend too much at Starbucks). When a good record is kept the facts can be enlightening.
• Contentment. Are you content with what you have? Many have driven up painful credit card debt by trying to keep up with the Jones sort of speak. The Jones can’t feel your pain, but you and your family do.
• Seeing Red. An unrealistic desire to live beyond your means can add to unnecessary distress. The spreadsheet was designed to show you when your in the “Red” each month, or the amount of any reserves and debt your incurring. Keep in mind that a business can not stay in business when a constant “Red” is being carried on their income statement. Well this isn’t a business, but your family with people you care about involved. Unlike a business you can’t fire your spouse or children.
Shop with a Plan. For your food budget plan your menu around what is on sale. Buy basic ingredients instead of prepackaged foods, and cook from scratch. Stock up on items that are on sale or in season. Ever go to Costco, well learn to buy in bulk with the premise that overstocking on certain items may spoil. Slash clothing cost by purchasing quality used garments of resale stores, and you would not believe the treasures you can find at consignment shops. Furniture can be bought at a fraction of the original price at garage or estate sales. You can get a great car when it’s pre-owned with a dealer warranty. Travel to areas where prices are known to be lower, if this is cost-effective. Watch how often you go out and shop, and learn to cut back. Plant a garden if possible and grow your own vegetables. Follow manufacturer’s maintenance instructions which may prolong the life of your appliances. Prolong your good clothing by changing out of them as soon as you come home, so you can help them to look good.
• Vicari Family Inc. Budget Spreadsheet Link: http://db.tt/QS1b4YC