As the “Great Recession” continues, the ability to pinch pennies is more and more vital. Employment remains elusive (unemployment lingers at 9.8 percent), and this long-standing depletion of family income causes tight budgets that call for desperate decisions. The key word for those with limited means or dwindling funds is — budget.
A monthly budget of expenses enables families to establish a plan to ensure the payment of all bills from anticipated revenues. While some may dismiss the concept of a budget, believing it only works in a business plan, a family budget allows the calculation of all expenses against the family income. The importance of understanding where the family finances are going is paramount.
Recognizing a consistent depletion of money to unnecessary expenses, a budget arms a family with a thorough comprehension of where money disappears and how to recover lost income when every penny counts.
Our Family Place finds, “The scenario rarely varies much — the income is generally fixed, and the outflow only seems to increase. If too much money is spent, the shortfall goes to the debt load. As the debt load increases, more of the money coming in goes to paying the debt, which leaves less for spending, which increases the debt.” Knowing where the money goes, prevents this cycle, referenced by Our Family Place, from starting, and the wasted income towards debt goes toward paying the electricity, food, and phone bills.
What is the first step of starting a budget?
Before pulling out the paperwork of bills, pay stubs, and penciling in numbers, Our Family Place recommends that you review your credit scores. The review allows a family to recognize all existing debts as well as identify issues and inconsistencies on the report. A credit score is either an asset or a barrier to responsible borrowing. Also monitoring a credit report assists against the possibility for identity theft.
Now that the preliminary planning is complete, the construction of an actual budget is the next step. Hiring a professional to construct a family budget is one suggestion, but may be income restrictive for those barely making enough money to satisfy the basic needs of the family. For those families, a family income budget can be assembled with pen and paper or online where free forms and worksheets are plentiful.
Tally an average of three months of salary including variable income like commissio
ns, which should include a six-month history. Once an average salary is calculated, add up three months of bills, divide them by three, and this shows the monthly expense average. Calculate all bills, including mortgage or rent, car payments, other loan payments, utilities, phone, student loans, insurance, and any other regular expenses.
Now add three months of all other expenses, which include groceries, medical bills, credit card expenses, clothing, restaurant bills, and cash outlays. Divide these bills by three to generate a monthly average. Now the most difficult part, thoroughly examine all of those bills to determine where the funds are wasted or over disbursed.
And, the most important part of a budget…is to stick to it. There is nothing worse than putting in so much effort on a task (that is not at the top of anyone’s list) to only then ignore all that strife. A budget offers a family an opportunity to utilize a limited income, and take care of its needs. Also, when abiding by a budget, a family can put back discretionary money into a savings plan (which many banks offer free advice on the differing plans) to save for retirement, college for kids, as well as unforeseen costs like medical emergencies, automobile repairs, or layoffs.
Some families may discover that their income just does not cover the monthly expenses. However, before diving into debt with credit cards, second mortgages, or payday loans to cover those bills, investigate all your options such as household assistance through state, federal, and local programs. These programs are there to assist families and will be offered to someone else if you decide to pay a bill through debt rather than utilizing these resources. When it comes to devising a sensible planning, these programs provide help to stretch an income further. A credit card handles the immediate expense but becomes an expense later plus interest.
To take advantage of these programs, the first stop should be to the local Department of Health & Human Services department. Along with federal programs, the Department of Health & Human Services provides information on programs the state provides, as well as local assistance, and can direct a family to other resources in the community as well. Some programs most families can apply for in any state include: Temporary Assistance for Needy Families (TANFF) is a federally funded program that offers temporary work. States also use TANFF grant funds for additional programs. Click this link for information on the federal program.
Energy Assistance through federal grants is offered through states.The Low Income Home Energy Assistance Program, is the federal program that provides help by covering heating bills. Most of these programs require some verification of income.
Childcare assistance is also offered through federal programs. A family may qualify for free or subsidized childcare. A local Department of Health & Human Services can also guide a family on additional government and local programs unique to their specific region or city.
With so much focus on financing, another invaluable component of overcoming strict budgets is escaping the thoughts of money. Continue the responsible management of money for this escape and do not dig for the credit card to plan an expensive vacation. Long distance travel is not recommended. However plenty of — free — (or low cost) activities exist to free a families mind and energize enjoyment in the most trying times.
Local parks, trails, family board game nights, and ice skating are all fun family opportunities to divert attention away from downtrodden stretches. If some travel is necessary, national parks supply a family with low cost amusement that does not demand reverting away from the so steadily, designed budget. National parks have seen an upsurge in visitors since 2008 — the year where the current economic recession is marked to have begun.
In periods of excess, it is easy to take advantage of the surplus. Now the cost of living is much more evident and planning with less is mandatory. Along with planning, families become aware of the importance of saving as much money as possible.
So use this slump to benefit the family. Prepare a budget, save some money back, and remember to smell the roses (because they are a lot cheaper than many other pastimes, and they smell better than a bill that isn’t in the budget).
Sources:
“About TANFF,” U.S. Department of Health & Human Services: Administration for Children & Families, http://www.acf.hhs.gov/programs/ofa/tanf/about.html
“Finding child care and early education programs,” U.S. Department of Health and Human Services: Administration for Children & Families, http://nccic.acf.hhs.gov/emergency/topic_childcare.cfm
“Low Income Home Energy Assistance Program,” U.S. Department of Health and Human Services: Administration for Children & Families, http://www.acf.hhs.gov/programs/ocs/liheap/
Our Family Place, http://www.ourfamilyplace.com/budget.html
Walker, Drew. “How to Set Up a Family Budget,” eHow.com, (1999-2010), http://www.ehow.com/how_571_set-family-budget.html