Steps to Budgets That Work
The information below is adapted from Larry Burkett’s book Family Budgets That Work.
1) Include periodic debt (quarterly insurance premiums, annual HOA fees, etc) in your budget. Set aside a fixed amount each month so that you have the money available when it’s time to pay these irregularly occurring bills.
2) Set aside amounts to replace furniture, appliances, and fixtures that wear out over time and for replacing automobiles. This can be included in your savings account, although you don’t want to dip into emergency savings for these items.
3) Set aside money for family vacations and recreation. If possible, budget 6% of your income for recreation and leisure. If you don’t have room in your budget for a nice vacation, consider inexpensive options such as camping and stay-cations.
4) Control impulse spending. Make a ‘rule’ to wait at least 24 hours before buying items that you weren’t specifically shopping for. Often the desire to purchase the item will go away once you have left the store. If you decide you really want and/or need the item, purchase it only if (1) it fits into your budget and (2) you have the money to pay for it.
5) Plan for gift-giving. Set aside money each month for Christmas and birthday gifts.
6) Watch miscellaneous spending. Miscellaneous spending is a problem area for most families. Track all of your cash spending for a month to determine what your problem areas are and then make a plan to deal with the problem areas.
7) The bookkeeper should be the partner who is best at it, but spouses should work together to establish and maintain the budget.
8) Develop a good system of keeping records. Some people prefer the envelope method–put the budgeted amount of cash in an envelope at the beginning of the month and spend only the money in the env elope. Other people use Quickbooks, an Excel, or phone apps to track spending.
9) Get out of debt. Pay off debts with highest interest first, while making at least the minimum payment on all debts. Once the highest-interest debt is paid off, apply that money to the next highest-interest debt, etc.
10) Commit to using at least 50% of any “windfalls” to paying off debt. The remainder of any windfalls should be used to meet shortages in other areas, including clothing and leisure.
11) Set family goals. If your children are old enough, include them in your budget discussions. You will be starting them on the road to good financial management and they will better understand why you cannot always buy them the things they want. Goals should include:
- Trust in God to supply your needs
- Save money regularly
- Family sharing time
- Husband and wife time
- Ministry to other people