Budgeting is an important part of most financial plans and can provide your family with an understanding of where their financial resources are going regularly. Unfortunately, when people think of composing a budget, they think it is going to be restrictive, they need to cut things out that they may not want to from their life. This may or may not be the case, but without having a budget you will never know.
Budgeting Doesn’t Have to Be Restrictive
Composing and following a budget does not have to be restrictive. It is vital to have a thoughtful process outlining what your needs and wants are and the dollars and cents associated with each. Needs should be things are that are must-haves for you and your family such as food, shelter, and clothing. Depending on your situation, travel or gym memberships may be needed to maintain your family’s mental or physical health. Your wants list should have things that you would like added to the budget if there are sufficient monies available for you to have or enjoy up and above your savings and needs.
Our tool, The Family Budget, will help you think about the items that should be part of your budget, creating the budget and tracking it over time. Advising clients on their budgets is a difficult task because everyone values things differently. As an example, when reviewing a family’s budget, it may look as though they have high expenses in a given area, such as entertainment, dinners out, or travel. This is very subjective as every family may value each of these areas of their respective budgets differently.
Make Simple Changes
In a given year, as a family, you may look to reduce your dining out to experience a more luxurious family vacation. Another year, or years, you may look to reduce the monies you are spending on vacations to increase your retirement or education funding. Budgeting comes down to the monies available to the household and the priorities for which they want to utilize those funds. This can and will most likely shift and change over time.
The important thing when crafting a budget is understanding what monies are coming in each month and where those monies are going. You also want to review, over time, areas of spending that may no longer be needed or necessary. Having a thoughtful process that documents your spending will allow you to review whether you are on or off budget and evaluate areas where spending, or savings, may be reduced or increased in the future.
Don’t complicate this process, it does not have to be challenging. Look at The Family Budget and begin crafting your budget today. This is a big step to understanding where your money is going and what is important to you as a family. This is the first step and then you must review and amend your budget as things change. Your budget today will most likely not look the same two, five, or ten years from now.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult your financial advisor.