Making Your Family Budget Airtight

First let us tackle the subject of how to make the family budget 'airtight' and all expenses are accounted for.  The first step is to Identify your family's needs from your family's wants. 

 

Tackle Your Needs List First

When it comes to the family budget, it's important to list down your needs and beside it, place the corresponding monthly amount you allot for it. I have listed a sample of basic needs an average family may have. 

1. Basic food,
2. Shelter (rent/amortization)
3. Basic clothing,
4. Education (tuition, kid's school allowances)
5. Utilities (water, electricity, transportation, communication)
6. Toiletries, Laundry & Cleaning Supplies
7. Household helper's salaries

1. House and Car Maintenance supplies
2. Insurances (health, life and non-life)    
3. Medicines, Vitamins, Doctor/Dentist fees
4. Taxes (income, property)
5. Transportation (gas, parking, toll fees, LRT/MRT, taxi, etc.)

 

The First Things on Your Wants List

After doing that, review the list and see if there are any items you can do without and place them on the 'want' list.  These are lifestyle choices that you are choosing to pay for such as the following:

1. Cable TV
2. Internet Connection (other parents would claim this as a need, though)
3. Newspapers/Magazines
4. Sports club membership dues
5. Tutorials, continuing education such as self improvement workshops
6. Driver
7. Upgraded cell phone (or paying for two lines)

 

Click here to read more about the other things on your wants list and putting together all your wants.

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Read more about the other things on your wants list and putting together all your wants.

 

The Other Things On Your Wants List

There are also many other items that are, from time to time, things that you would like to give yourself and your family as treats, such as nos. 8-14 below.  A lot of us forget to factor these into the budget:

1. Salon/Spa (hair color, rebonding, manicure/pedicure, massage)
2. Delicatessen (specialty food items)
3. Family members' birthdays and Christmas gifts
4. Gimmicks—movies, specialty coffee shop, dinners out, potluck parties, boys/girls night outs
5. Upgrade of home appliances, electronic equipment (stereo, digi-camera, laptop, LCD TV, etc).

1. Hobbies and school projects—crafts, aquarium, school trips & book fairs, etc...
2. Vacations (summer, Christmas holidays, long weekends)
3. Debt reduction
4. Charity

Now, what you may want to do is determine how much you are actually spending for these on a monthly basis. If that's the reason why your budget always gets overboard and you have credit card debt, you may want to think of eliminating some items in the wants list or reducing the amount of money you allocate for it. 

 

Putting Together All Your Wants

Incorporate items 8 to 14 of your wants list in your savings allocation.  Remember to first set aside 20% for your financial freedom fund which you NEVER touch and only invest on asset building instruments.

I recommend you allocate another 20%- 25% for the following: 

• 10% for Long Term Savings for Spending—like annual vacations (item#14) or big ticket purchases (item # 12.).
• 10% of your monthly income is for your PLAY account that you allocate for items # 8, 9 11 & 13.  Do spend this money every month so you balance living in the NOW and saving for your future.
• 5% for debt reduction if any–so you clear and put closure on your not having been fiscally disciplined and responsible.  Doing this gives you the freedom and access to more funds in the future as the habit of paying debts can now be channeled to having 5% more in your pocket. 
• 5% is for charity and gift giving which is in the area of sharing your 'treasures' with the community.  The other 5% is sharing your time and talent which is priceless and very well increases the value of your total giving. You can also make this so effortless by doing the suggestions I got from my friends: 

 

For  CHARITY and GIFT GIVING—Use several “piggy banks” throughout the year to set aside loose change for charity.  Below are some suggestions on how to set aside the money.

• Smallest change (5, 10, 25 centavos) go to the 'Pondo Para sa Pinoy' fund or a similar charity that you support.        
• The 1 peso coins go to another piggy bank allocated for neighborhood carolers during Christmas.
• The P5 coins go to a third piggy bank for conversion into P20 bills that are given to the kids of household helpers and kids of the husband's golf caddie, or gardener or guards, who come around every Christmas morning for their aguinaldo.
• The P10 coins go to the piggy bank that's opened for any of the following throughout the year:
  • Sponsorship of a poor couple from a depressed area to attend a marriage encounter weekend in Tagaytay.
  • Abuloy for a neighbor or friend or relative who passed away
  • Donations for your alumni foundation's medical mission to buy medicines and supplies during calamities.
  • Supporting the feeding program of your parish for undernourished kids

Remember, these are suggested allocations and are not set in stone. Do massage the numbers so that it will work for you and promise to STICK TO IT.  Imagine the rewards of having a working budget—living a life that is abundant and free from want. 

 

Photo from sxc.hu