The previous lecture touched on a fundamental point of the financial diagnosis that consisted in the identification of its financial assets and of its debts. Our proposal for today is to introduce you to your family budget. We will seek to conclude that for your financial success you should build and feed your budget regularly.
Certainly you have heard of the concept of family budget, a subject that has been debated exhaustively in the various media available. However, despite the debate and the calls for the construction of the family budget, many people are still unaware of their potentialities and valences.
What is the Family Budget?
The Family Budget is nothing more than the strict identification of the family’s income (the money inflows) and the destination that the family wants to give (expenses).
It should be noted that we speak first of the Income, since this is the starting point and the basis of the Family Budget. Otherwise, we are increasing the risk of indebtedness .
Each of the portions of the budget is divided into two:
- Income – Fixed and Variable;
- Expenses – Essential and Waste.
The Two Types of Expenses
We like to classify the two expenses as being the Essential expenses in our life and all the others. We call “all other” wastes to create a criterion and draw attention. These expenses will be those that we will have to cut first to cover the essential expenses.
Examples of Expenses:
In the formations and check-up consultations we have made over the last three years we have found that people consider:
- Essential – Household Income, Water, Light, Gas, Food, Transportation, Medication and Education. To these we add the savings, which should be considered a priority to increase the probability of saving;
- Waste – All others. They are not the wrong expenses, but rather the expenses we can afford to pay for the essential expenses.
These formations are usually very didactic and in a very practical logic. We try to get people to question their habits and to complicate the various themes and fears about money. We have shown that the financial challenges are transversal and that there are ways of improvement. You can consult the program of the courses here.
How to Make the Budget
The budget should contain all relevant information. As revenue sources are easy to identify, the same will not be true of expenditure. In this context, we have several alternatives. We may choose to collect invoices or proof of various expenses throughout the month and register them.
Some people use a notebook. Others use Excel or Kakebo tools. Alternatively, you can use your own software for this purpose – some banks already have their tools.
What are the main Values of the Family Budget
- Identify your current situation;
- Define savings objectives;
- Question and identify eligible expenses;
- Plan the next few months.
Many people give up making the family budget at the end of a few weeks, much due to the slowness of the method used (notepad, Excel or kakebo). However, when you budget for the first time you will clearly notice where you spend your money. It will force the family to question the reasonableness of the expenses which results in cost cuts or even elimination of certain expenses altogether!
We did a specific lesson (which is not part of this mini-course but also free) to explain in greater detail the operation of our Excel tool. Email us to request this lesson.
Try to make your budget and identify the expenses that can be reduced. We really want to solidify this point because without a budget it becomes difficult to completely control your money . Tomorrow will realize in greater detail the potential of the budget, because we will talk about Where and How to cut costs. We will also have an exclusive offer not to be missed!