Successful Household Budget Management

Keeping Family Finances on Track while Budgeting

Jul 14, 2009

Annualizing expenses, keeping track of daily spending, having emergency funds, getting rid of expensive credit and planning for extra money can help fix family finances.

A home budget can get easily sidetracked if no one makes the effort to keep the family finances on track. Even the most sophisticated and user-friendly home budgeting software won’t be very useful in such a situation. Here are some suggestions for successful household budget management.

Annualizing Family Expenses

This is an approach commonly used by financial planners. They advise their clients to annualize their expenses and have enough money to cover these. This means when a budget is planned, add up the annual, half-yearly and quarterly expenses and break them down into a monthly sum. Through this method, the temptation to overspend in months when there are fewer bills is effectively eliminated, allowing expenses to be evenly covered throughout the year.

Keeping Track of Daily Spending

It doesn’t matter how little is spent a day, just be sure to keep track of all daily spending – the occasional caffé latte, gossip magazines, ice cream for the kids, lottery tickets, hotdogs, etc. Meticulously record every cent spent so that it’s clear where the money goes. Try to avoid such impulse spending as when added up, these can hamper efforts to remain true to the household budget.

Preparing Emergency Funds

Set aside a certain amount of money for emergency uses. No one can tell if a tree is going to fall on the family car, Dad will be sick for a long period of time, or the family dog needs an emergency operation after swallowing a tennis ball. So it’s best to be prepared. If the emergency funds never get used, so be it. Any excess can be put into better use some other time.

Getting Rid of Expensive Credit

Many credit cards come with high interest rates and fees. Be sure to settle for the right credit card. Pay credit card bills on time to avoid late payment charges. Those with real difficulty controlling their credit card usage should stop using credit cards. Switch to debit credit cards instead. These allow users to use credit card facilities but only let them spend their own money. It’s an effective way to stay out of debt.

Planning for Extra Money

Families with extra savings should plan how these can be put to good use. Don’t let it sit around without any purpose. The temptation to spend it on impulse purchases can be hard to resist. Find out ways to make more money with these savings. Invest it in a managed fund, use it to pay off some existing debts or upgrade the family’s private health insurance.

Keeping the family finances on track is crucial when budgeting. Some tips for successful household budget management include annualizing the family expenses, keeping track of everyday spending, having emergency funds, switching from credit cards to debit cards and planning what to do with extra money.

Drury, Barbara. Personal Finance for Dummies. Queensland: Wiley Publishing Australia, 2002.

The copyright of the article Successful Household Budget Management in Family Budgeting is owned by Wei Yin Wong. Permission to republish Successful Household Budget Management in print or online must be granted by the author in writing.