Why Budgets Don't
Work and How to Fix It by Terry Rigg
This article is for
those families that have sat down at a desk or the kitchen table
time after time trying to develop a family budget that they can live
with.
Why don't they work?
There are several
answers to that question. Most budgets are doomed from day one
because they are too complicated, don't have the commitment of all
involved or the numbers simply don't add up. The biggest
culprit is that most people don't allow for unexpected expenses.
Let's tackle these one
at a time:
Too Complicated:
When you list every
expense you have on your budget you set yourself up for defeat.
Some budgets include such things as cleaning supplies, dog food,
haircuts and car gas. In order to keep track of all of these
you would need a new box of envelopes every month.
Answer: Streamline
your budget. By simply including a topic on your budget
entitled "Household" where you can include everything you
spend money on each month, excluding bills. Groceries
will undoubtedly be the largest expense in this category. By
taking the extra time to figure what needs to go into your household
budget when you set it up, you can save a lot of time each payday.
Commitment:
Many times the
commitment to live by a budget is lacking.
People get into
spending habits that are hard to break.
There is constant
friction in the family over money.
It is more
comfortable to live beyond your means.
Answer: You have
to consider all of the above problems when setting up your budget.
The Family Budget is just that, the FAMILY BUDGET. Everyone in the
family that is old enough to count should be included. I don't
mean to say that children should have a say in where the money goes,
but they should be aware of what the spending limits of the family
are. If you work closely with your spouse in developing a
family budget you both are more likely to stick to it. There is one
other detail that will help. By setting aside money for
yourself and your spouse, that you don't have to account to the
other for, your budget is more likely to succeed.
The Numbers Don't Add
Up:
You have more budget
than you have paycheck. Generally, this is caused by not being
realistic in your budget. You try to make your paycheck fit
your budget.
Answer: Start by
listing your household expenses and bills. Then include 10% of
your income for long and short term savings. If this total is
more than your paycheck, you have to cut back. Start by
looking at your household budget. Are there items that you can
do without? If you have money left over after considering all
of the above, then increase your savings.
Unexpected Expenses:
This can be from your
car breaking down, need a new washer or any number of other expenses
that you can't predict.
Answer: While long
term savings is for things such as a home or car purchase or college
for the kids, short term savings is just as vital to your financial
security. A short term savings will accomplish two things.
It will provide you with the money you need to pay those unexpected
expenses and it will cut down on the use of credit cards. The short
term savings could save you hundreds of dollars a year.
When you develop your
budget, keep the following things in mind:
Make your budget a
simple as possible
Get the family
involved.
Make your budget fit
your paycheck, not the other way around.
Plan for the
unexpected.
Visit The Complete
Budget and Bill Organizer for more details
