Family budgets establish spending guidelines for all of the family's finances. Creating a budget often elicits groans from all involved parties. 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.
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.
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.
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 a 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.
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.
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.