Monday, February 2, 2015

Budget is not a dirty word in my household - By Elizabeth Richards

Ten years ago, I stumbled across a message board on called Family Finances. I knew we had issues with how we managed our money, and I was looking for help. It was there that I first learned that simply having a list of bills and when they were due was not the most effective way of managing our money. A real budget is essential to meeting the goals we set.  
We have always paid our bills on time. We have great credit scores. From the outside, it probably looks like we have it all together. But despite the fact that I have a spreadsheet detailing a daily projected cash flow for the next month, this isn’t always the case. When I relax too much, have extra money coming in, and ignore the budget I have set, things begin to unravel. Suddenly, we’ll have eaten out six times in two weeks, and the cash in our checking account is dropping alarmingly fast. That’s when I know it’s time to reign in the spending, to revisit the budget, and to make my money work for me.

A complete budget is much more complex than just knowing when the bills are due and whether or not we have the money to pay them. A budget is a plan, a map of where we want to go. Having a complete budget allows us to avoid unpleasant “surprises” (which are never really surprises, just things we forgot to plan for). Following a budget frees me from the anxiety of wondering how the next bill will be paid.
My family is fortunate, and I am grateful for everything we have. We have never had to worry about a roof over our heads or food on our table. We have health insurance, and while it’s not great coverage, I know that a medical crisis won’t send us into bankruptcy. We have everything we need, and much of what we want. But when the budget falls by the wayside, we aren’t able to meet some of the bigger goals we have – like saving for retirement, saving for our children’s education, saving for the next great vacation.
Our income is variable. I’m partially self employed, which means that some months we have a lot of money flowing through our account, and some months we don’t. Though my husband has a full time job, his salary alone will not cover all of our obligations. Creating a detailed household budget allows us to make it through my slow times, and keeps us on track in the times when we have more. 

A budget is slowly helping us dig our way out from under a mountain of consumer debt. We bought a house too soon, took vacations we couldn’t really afford, and sometimes spent far too much on entertainment. We didn’t delay gratification when we should have. It’s hard to say no to the kids when they want to experience something, and sometimes we used money we didn’t yet have to pay for those things. With the help of our detailed budget, we have learned to really examine whether or not we can afford something. Often, the answer is no.

On the flip side, a budget helps me see the light at the end of the tunnel. This plan, along with my projected cash flow, allows me to adjust as necessary. No one budgeting method works for every family, but I firmly believe every family needs to have a plan. 

And the whole family should be involved in this plan. Windham resident Chrystie Vachon, who runs a blog at and is a former TLC Extreme Couponer, said, “It's never too early to introduce children to money and sticking to a budget. Getting the children involved will not only give you a sense of accountability - you can't fail in front of your children - but also a great opportunity to show them responsibility.”  

            You should have a budget category for everything, and children should be aware of what is available to spend in each category that relates to them. “In our household, the children are well aware of our food and entertainment budget, so if they want to do an extra-curricular activity they know ahead of time whether it's in our budget or not,” said Vachon. “It helps them make smarter decisions about what they want to do with the designated 'fun' money.”
Sometimes the hardest part is just getting started. Luckily, the internet offers a plethora of information, and a Google search for “household budget tips” brings up many resources to get you going.  On his website, the well known financial guru Dave Ramsey says “you don’t have time not to make a budget!”  A budget shouldn’t be scary, or viewed as confining. A budget is just a plan, according to Ramsey, and a plan offers freedom.

Some of the top pointers on Ramsey’s site include giving a budget time to work – don’t give up too quickly; “spending” every penny on paper before your month begins; and, if you have a spouse or partner, working on the budget together.

There are some simple ways to begin. Sit down with records of where your money has been going – bank statements, credit card statements, receipts. Make a list of every expense you can anticipate in the coming month or year. Don’t forget quarterly payments, or expenses that you know will happen, even if you don’t know when (like car repairs or vet bills). Designate which items are most important until all available money is accounted for. 

Don’t ignore big expenses (saving for retirement or college) or little ones (those candy bars and sodas from the gas station add up). You may not be able to fund them all right now, but at least you will know what areas you need to work on. Put aside money whenever you can for these anticipated expenses. You can see clearly what you have to spend on needs (food, clothing, housing, transportation), and how much you have left over to spend on wants.

A budget won’t make up a money shortfall, but knowing ahead of time where you need to cut or bring in more income can offer peace of mind and take the stress out of dealing with your money.

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