Effective Family Budgeting Essay

1124 words - 4 pages

Saving for children's college fund, saving for retirement, and making a large purchase such as buying a home are not attainable unless one sets up an effective family budget. Today, saving money is often difficult as everything is getting more expensive day-by-day. Setting up a budget can be a lifesaver for a family, but only if one follows through with the budget that was set up.Some of the most common mistakes one makes when setting up a budget are not keeping track of monthly income and expenses, not being consistent with monthly savings, using credit cards excessively, and lack of emergency funds. An effective way to keep track of monthly expenses and income is to prepare a worksheet and keep track of all spending and income. This will help one save a certain amount of money at the end of each month after all necessary expenses have been taken care of. Consistency is a key to managing an effective budget. When one is not consistent with saving, he or she tends to over-spend, which will effect budget goals. By setting up a budget, one is able to keep track of where his or her money goes, as long as accurate records are kept.When setting up a budget one must first accurately estimate and record one's income. This includes salaries, bonuses, commissions, family business profit, or other means of income to list in one's budget. The next step is setting up household expenses. This includes recording everything you spend and setting up a schedule to spend them on. This can mean monthly bills, annual expenses, or day to day living expenses. Next one needs to set up his or her budget goals. When setting up a budget, it is important to write down ones short, medium, and longterm goals. He or she needs to make sure to set up smart goals with explanations of a plan of how to achieve them. Make them realistic and prioritize them when setting them up in your budget. Next one needs to prioritize how he or she wants to save money in a budget. What savings categories to budget for and how much to fund them and on what schedule. Now, one needs to organize all expenses into categories of necessities, needs, and wants. This is also an important step to setting up a good budget because it tells what must be paid and when and what cuts can be and need to be made.As stated above, one of the most important steps in creating a budget is for one to create an emergency budget fund. This fund should be established to pay for unexpected expenses and because most underestimate what he or she spends and it allows for a cushion so one can make adjustment and money can be saved.Now, one should set up his or her family budget allowance. This will be based on the amount one has left over after all necessities are paid and needs are cut to agreeable amounts. This tells one what he or she should have left over for savings and everyday wants. Another very vital step to setting up a budget is to set up a budget for personal allowance. This step takes discipline and can undermine...

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