How to Create a Successful Home Budget
Feb 15th, 2010 by admin
The Process of Making a Personal Financial Plan and Sticking to It
The home budget is a detailed financial plan that describes how resources will be used. The process of making a budget that can be maintained is more complex than writing down income and subtracting expenses. The successful home budget is developed with the personal or family goals in mind. These goals drive the budget instead of allowing the debt to drive the budget.
How to Set the Goals
Every family has goals. These goals may be to go on a particular vacation, take a family night out at the movies or to purchase a new car. The family might even have long term goals such as paying off the home mortgage sooner or buying another house. Each person in the family also has goals. These family and personal goals must be considered before the budget plan is developed. In a goal driven home budget the goals are developed first. Consider how much each goal will cost to accomplish. Remember all the resources required to reach that goal. There may be time issues to think about such as a son who wants to earn his camping badge in scouts. Yes, the budget will need to accommodate the purchase of basic camping equipment, but if it is winter, time will also be involved. The wait for spring to arrive will let the family begin saving for the equipment closer to time. Always develop the goals first. This is the only way a family can stick to the budget.
How to Link the Goals to the Budget
Linking the goals with the budget is called strategic planning. The home budget is always more successful when strategic planning is implemented. Now is the time to list all the family expenses. Everything. Every dime the family spent last month must be written down on paper. Do not pass judgment on the partner for frivolous expenditures, this is a time of growth and cooperation. This is an information gathering step. The more information that can be extracted the better the home budget outcome will be.
Make a new list and include only the main payments such as utility bills, home mortgage, insurance payments (list these separately). Below these draw a line. Below the line, move items from the last month’s expenditure list over to the new list. Include only the items required to live. Do not include restaurant meals, cell phones, movie tickets, etc. Study the items that were not moved. Which of these must be included in this month’s home budget and, which can be excluded? Consider how the needed items can be reduced in price. Write this reduction plan down and move the new amount to the new list. Repeat for every item on the list.
List all income resources. Enter the amount actually brought home. If optional items such as indemnity insurance are taken out of the check, list the amount before the insurance is taken out and list the insurance in the expenditure report. Consider if the indemnity insurance is duplicated somewhere else, if so it is not needed and can be cut. If it is not duplicated, consider the family need versus the expense
Read more at Suite101: How to Create a Successful Home Budget: The Process of Making a Personal Financial Plan and Sticking to It http://personal-budget-creation.suite101.com/article.cfm/how-to-create-a-successful-home-budget#ixzz0fetyjA5c
