- November 22, 2016
- Posted by: Roger Walker
- Category: Finance
Managing a family budget is a simple thing, very simple; just follow simple family accounting rules.
Buy, buy, buy … how nice to spend: the purchase gives pleasant feelings. It ‘nice to give a gift, it is nice to make a nice trip or buy a new car. But then there are bills to pay, the mortgage, school books and many other expenses.
Manage expenses personal, the home accounts for a couple or a family budget is how to manage the accounts of a small firm. The balance sheet at year-end must be balanced or in surplus (if you want to put something aside for the future).
There are 4 rules of common sense that can help us for a correct and balanced family budget.
Rule No. 1 – Learn from the past
Having a record of expenditure incurred in the past allows us to have a complete picture of current expenditures. Most of the home accounting expenses is repeated monthly, bi-monthly or annual maximum. Even the revenue has a monthly periodicity.
To keep track of expenses you need to arm yourself with patience and a “binder” and store in order of time and type all invoices received:
- Utility bills: telephone, water, electricity, gas
- Insurance and maintenance
- Receipts for rent payment
- Medical expenses (will also be useful for the deduction)
Then there are lots of “spending” that does not make sense that we document with receipts. It is just track them down and be able to calculate the total at the end of the month. For this a note in your diary, on a spreadsheet or better yet family budget software or an app can help us. Even a simple but effective app for free expense management for smartphone can help.
Rule No. 2 – Plan future expenses: Make your budget
Then both outputs which revenue can be divided into two broad categories:
- Ordinary (the most frequent, regular and predictable): The car’s maintenance costs, insurance, food expenses and bills are rather ordinary expenses that are repeated very often.
- Extraordinary (occasional and less frequent): The purchase of an appliance, a car or a gift for a particular event are extraordinary expenses that do not occur with fixed maturities.
No one can predict the future, but with a careful analysis of data to produce an estimate / quote very likely. From our archive of expenses so we can identify the ordinary expenses that will repeat probably the following year and the extraordinary expenses that affected the budget in the previous year.
The budget for the following year will be made so the total spent on ordinary expenses + extraordinary costs that we expect to do.
Ordinary expenses + extraordinary expenses = Next year’s budget
Take for example the first item of the previous year’s spending: utilities (ordinary expenses).
You may also like to read another article on Heygom: 5 Tips to improve your personal finance plan
Rule No. 3 – Do what you need, otherwise, sooner or later you will get tired
To control their own costs is an ongoing work, which if done consistently throughout the year leads effortlessly to a great result.
Many times we start the momentum, and we begin to record every receipt: even to 1 coffee dollars, placing it in the category “bar.” Or divide food expenses in meat, fish, vegetables … etc.
The 3 tips to avoid wasting little energy and time in analysis useful are…
- If the category you want to control produces a total expenditure of less than 1% of the total it is perhaps an unnecessary category;
- If at the end of the year the figure for expenditure does not help to make any decision on the matter, but has a purely aesthetic function, then it does not need;
- By contrast, if a category (for example, that the utilities) absorbs much of the volume (more than 35% of revenue go there) then it might be useful to divide it into sub-categories to analyze if there are there of savings margins.
Ultimately, everyone will have to find the best method to be able to be efficient in the recording of costs: use a calendar, a sheet of paper with a table, a spreadsheet or a software family budget. The important thing is that it is easy and fast.
Rule No. 4 – Enjoy savings: Saving does not mean “austerity” but responsible economy
All this attention in the personnel budget management and family should not lead to being frustrated by austerity Research, control and management of family and personal accounts must be functional to a benefit that is seen over time:
- The first benefit is the assurance of being able to have more and those savings set aside that rely in case of need: unexpected expenses, lost earnings
- The second benefit is the prospect of a nice gift: the money saved a year, can afford the next year to give us a place in the stands, and maybe a trip year after year new car
Perhaps saving is not a simple thing, but it’s not impossible. It is true, however, that “with the times we live in” a family budget (although not too fussy) is a must.