This question immediately suggests that it should be part of the whole family budgeting process. It is as much part of the learning around setting it up, considering it’s usefulness, function and purpose.

Creating or setting up the budget is one thing. Sticking to it, implementing and sustaining it is the ultimate goal and achievement. That is worth celebrating. Families have different ways again to use or refer to their family budgets.

For some it will be no more than a general guideline. For others it would constitute an absolute rule not to be bent or broken. Others still will use the family budget as a strategic planning tool to protect the interests of his/her family and plan for a full and happy life, setting a small amount aside for the future, invested smartly and securely, with confidence and pride.

The very day the family budget actually assists you in reducing spending and making informed smart financial decisions that is the day you do not sit back and relax, but throw all your energy back into in making it even better. This is an on-going, continuous improvement exercise, experiment and undertaking of your own making, design and creation!

The family budget can assist you in handling unforeseen increases in costs and unbudgeted expenses.

It is very common to get discouraged when on the family budgeting path. The minute you feel you have taken strides forward, something will happen, a setback, an unexpected upset or expense, breakdown, maintenance or replacement of an appliance, major purchase or repair and many other setbacks will occur.

In a sense it makes families more robust, responsive and adaptable. Tracking your finances makes you aware of patterns and business cycles, cost and many other factors that affect the home financial life and health. Rent increases, more expensive cigarettes or tax increases, higher petrol or energy prices or increased travel to and from work are but a few examples of these events and issues that might come up.

When faced with these challenges, problems or complexities, having your fingers on the pulse of your available resources, discretionary monies, savings, line of credit, rates, banking fees and more, will all help you make the right informed decision that is best for your family, at that time, act accordingly with diligence and confidence. You are in control of your financial situation and not the other way around. It enlightens and empowers you to do more with less!

Unpredictable pricing and fluctuating prices are not easy to reduce in any budget. Having this variation handy, spread over a period of time, can help you plan better and anticipate sudden spikes or higher expenditure during certain months of the year.

Emergency, contingency and improvements are not priorities for most of us when we receive our pay. To ensure a steady stream of income into these categories make ”saving for a rainy day” come to life and have some real impact and meaning in our financial planning.

Cutting non-essentials first is a good strategy. Alcohol, long distance phone calls, gifts, gardening and landscaping services, decorating costs, pet care needs, recreation and lottery tickets can all be good money-saving categories. The more items you can include in your cost reduction, the greater the dollar benefit.

It should come as no surprise that by just cutting a little in each of these categories, families can easily save upwards of $240 per year without too much noticeable difference in their lifestyle or any major disruptions or sacrifices. If it is less than 1% of your total spending, it should not really cause pain, grief or reason for worry.

Family budgets can also provide hints on how to save on non-essentials: Buying more or less of a product or service, comparison shopping for the lowers possible price, bulk and discount, sale, buying a lower-priced or no-name brand. Frugal gift giving (Christmas, birthdays, friends and family) is a way to save money.

Elimination of waste is another clever way to save money that is often overlooked, BUT not in the family budget. Spur-of-the-moment clothing purchases, too trendy, uncomfortable and not the right size perhaps?

Making an active effort to participate in the family budgeting process will carry its own rewards as well. Self-discipline and curbing your own spending will soon become second nature.

    • Enable families to make large spending reductions in the right places at the appropriate times

Anything from a small rent increase of a couple of dollars to an all-out job-loss can impact home life and finances, and not in a positive sense. The family budget offers you the opportunity to prepare somewhat for this, whether pro-active or responsive action follow. Flexibility and adaptability are bonuses with family budgeting.

It will spell out the reality, damage, impact, what needs to be done at the barest of minimums to get by and offer stop-gap solutions, practical and accessible, right away. It is not to say that it will have you not worrying about it! All of us will be concerned if this is our situation, but it will leave you more prepared to deal with the challenges head on and right away as opposed to wasting time wondering what to do and how bad it is.

    • Protect against income reduction and inevitabilities

In the case of job loss there are also immediate realities to consider. Financial implications are huge for family life and the pressure is on. Family budgets and informed budgeting is a tool and time worth every cent spent.

Because of the heightened awareness and familiarity with the context and content of the financial, spending and cost cutting plans and strategies, goals and savings, the family budget process now offers avenues to solutions rather than barriers of debt and no point of return.

Tackling normal spending categories first, reduced transportation costs, packing a lunch as opposed to buying every day. Suspend all discretionary funding, move money in your accounts around to cover basic expenses. Luxury items and recreation, sports and other leisure activities will be another category to find some budget dollars.

Maintenance and repair costs might be suspended or delayed, cost-cutting is never pleasant but the budgeting process makes it easier to know where the cushions and ”˜fat’ are, that can be trimmed or eaten away at.

Other positive job-changes like promotions and relocations could also have a lot of impact.

Taxes, relocation fees, buying-and-selling homes, settling allowances, insurance, storage etc. they all add up. The family budget will help you assess your situation more clearly, leading to better decision-making and informed empowered choice.

Any discussion on ”˜How to set up a family budget will be incomplete without a section dealing with debt and debt consolidation.

Normally we use credit cards for a variety of good reasons, like convenience, business expenses, online commerce, instant accountability, unexpected bargains or expenses, medical and or other emergencies.

There are however, also very definite situations where plunging yourself deeper into debt is not a good idea at all:

    • An expensive item you know you cannot afford (indulgence shopping). If you do not have the cash funds to purchase it, charging it is not going to make it easier for you to pay it! By putting it on plastic you just increased the price and interest charges. Your budget will not thank you later for this one. Bad decisions often lead us down the wrong path. You will be left facing paying for this choice for a couple of years down the road still.

    • When grocery shopping, pay cash rather than plastic, or you will most likely overspend.

    • Meals, drinks, nights out and other entertainment charges are all like the miscellaneous category in a budget.

    • If you are truly going to be budget-minded and money conscious while trying to get out of debt, consolidating or in debt-help avoid the plastic!

    • Check the interest rates on your card, consolidate accounts, go through the exercise of balance transfers and seek the advice of licensed professionals to assist and advise you, on how best to approach credit of any sort while on the mend to financial freedom, reputation, repair and recovery.

    • For family budgeting purposes, credit cards are for EMERGENCIES ONLY and should not be used to pay for bills or luxury items. Carrying a high balance, missing a payment, paying less than the minimum, might negatively affect your credit rating and undermine all the other good work you were doing in your budgeting process.

    • Watch out for late charges, higher rates, annual service fees, interest rates and charges, and cash advances.

    • Using your credit card at an ATM for a cash advance can sometimes not be convenient, as the rate and cash advance fees can total as much as 24% or higher. This is even more than loan sharks or other payday loan providers.

    • Do not use credit cards for any of the following reasons: unbudgeted expenses you cannot pay for; having no cash savings to help you with unexpected expenses, consuming more than you can afford or impulse shopping.

Debt management and family budgeting actually fit like hand-in-glove together. They compliment and strengthen each other if used appropriately and with caution, diligence and commitment to change.

It is advisable to get a handle very early on in your budgeting process on what exactly the debt situation is. For most people this is the most painful part of the process. Facing their monetary past and the aftermath of overspending, lack of budgeting and large debt!

Extreme care should be taken early on as well to protect your financial interest. Review your family budget spending categories and avoid debt by every means you can and not use it for living expenses.

Repaying your debt should be the main priority. Consulting with a financial planner, debt consolidation professional and specialist will help you answer the question whether you need to consolidate, transfer, stop using credit cards all together, file for bankruptcy or what your other options are. Exhaust all the possibilities before pursuing this route. Debt Fix can suggest options to help you avoid bankruptcy.

A personal debt review can be painful, but is very necessary to assess the status quo or where you are now and how good or bad it is.

Debt is a wide concept, covering lots of things, including mortgage, car, credit cards and other retail credit card accounts and personal loans of any kind. Loans from family or friends also have to be included, if you are honest about making a difference, repaying in a timely fashion and truly want to know how bad it really is!

Your summary sheet can carry the following headings: account, total amount due, monthly payment, total interest paid last year, and interest rate. Financial advisors call this a debt review register. It is painful to see this data, because it will clearly show the impact of bad financial decision-making. Interest paid gives you absolutely NO BENEFIT WHATSOEVER!

Strategies for debt and cash flow management in a family budget include:

    • Consolidating all consumer debt (that is everything you owe, except for your mortgage) and making it a priority to pay it off in a timely fashion, getting reduced rates and maximizing your effort in wiping the financial slate clean.

    • Paying off high-interest credit cards first

    • Use a line of credit if you can as the interest rates are typically lower

    • Suspend any kind of spending on any credit card and establish good habits paying in cash for purchases

    • Use all store-based cards wisely or not at all, if that is the disciplined approach you have chosen

    • Interest free credit cards often have a honeymoon period and you could qualify for them even with a bad credit history — showing restraint and good financial management by making your payments on time, every time and keeping the account up to date, will go a long way to regaining your confidence and repairing your credit.

    • Utilise the service of a good credit counselling service to assist you and deal with your habitual over-spending and shopping addiction

    • Use credit card statements for budgeting purposes, accuracy and tracking.

    • Loans are handled no differently — the strategy is pretty much the same: find the highest loan balance and the highest rate and start paying the latter first

    • Avoid any new debt

    • If after a six month period you have paid like clockwork, contact your creditors and negotiate a lower rate at that time to ease the burden a little bit

Family budgets are not here to depress you even further. The fact that you are taking pro-active measures to participate in your life, sends the right signals, not only to creditors and credit counsellors, but also to the family members that care so deeply about you.

Another popular topic for family budgets is children and fun activities. How to make the most of opportunities, while living and functioning within limited means and on a budget, causes many money wise parents concern:

    • ”The best things in life are FREE” — you just need to know where to find them, and then enjoy them together. Being cash-strapped or budget-challenged should not minimise the fun you have as a family.

    • Prioritise it together with the other members and the children in the home (if they are older), discussing alternatives like picnics, walks, visiting a beach, or a park.

    • Use coupons for entertainment.

    • Matinee rates for movies are a great way to save money.

    • Avoid window shopping or expensive shops where you will be tempted to spend more money or leave feeling guilty that you cannot.

    • For discounted, bargain-priced brand-name kids clothing, shopping at end of season sales is a real budgetary blessing!

    • Budget for one very special outing you can do as a family such as a holiday (e.g. camping or road trip) every year.

There are always ways to do little things together, make memories and invest time and attention in one another that costs absolutely nothing but time, a smile, a hug or two and a caring heart to share them all with!