Seven Things that Can Go Wrong with a Family Budget - and How to Avoid Them
Posted on: 18 November 2019 by Jessica Jones
A family budget is a detailed plan of the income and expenditure of a family.
It is usually used to allocate specific funds for different needs and wants. This budget is a necessary tool that can provide financial stability and prevent overspending.
Not only does a budget help to cut back on spending, but it also makes it easier to set aside money for savings. However, seeing as the majority are not financial experts, most people have a hard time creating a budget that they can adhere to.
Here are seven things that can go wrong with a family budget and how to avoid them;
Setting unrealistic goals
The main reason for setting up a budget is to be able to cut back on spending and save money. Due to this reason, you might be tempted to drastically reduce the amount of money you spend on necessities like food and utilities.
The impatience and need for fast results can lead you to set spending goals that will be impossible to keep. Doing this can lead to disappointment and cause you to abandon your budget.
The key to a successful budget is to gradually reduce the allocated amount until you find a balanced amount that sufficiently caters for your needs. You will be able to get accustomed to finding money savings schemes that make it easier to keep to the budget.
Leaving no room for emergencies
There is no telling when a situation that requires urgent funds will occur. Not setting aside some money for emergencies will not only derail your budget, but it can also take up all your income and make it hard to address other needs. Ultimately it can result in debt and you having to take out a loan.
Set aside a fair percentage of your income every month as emergency funds. This way, you will not be caught unawares when situations arise. Also, your budget will not suffer for it.
Cutting off all fun activities
Although budgets are usually dedicated to the most critical needs of a family, it is essential to include wants and events that are enjoyable and satisfying. You deserve to splurge or give yourself a special treat once in a while as a way of relaxing.
Leave a small amount for activities that your family can all enjoy. You will be less likely to feel guilty about spending on a new object or takeout when you have already allocated funds for that specific purpose.
Refusing to update your budget
Money spent on things, especially utilities, might change over time. Keeping the same budget month after month can be a recipe for disaster. The added cost of bills might lead you to think you are overspending and can cause you to lose interest in your budget.
It is important to take note of the increase and decrease in your bills and adjust your budget accordingly each month.
Inaccurate arrangement of priorities
Ensure all your payments are prioritised. Mortgage or rent would be top of the list, followed by utilities and rates, then any loan repayments and so on. Improper arrangement of how your money is to be spent can lead to a massive risk of overspending, potentially pushing you further into debt.
Take time to determine the essential categories and allocate funds according to how important they are. There will be a greater chance of sticking to the budget this way.
Debts and repayment
While setting up a budget, you have to take your debts into account. The repayment should be one of the first few categories that you allocate your money to. Leaving no funds for paying your debt can cause you to default on payments, thereby affecting your credit history.
It is advisable to allocate money for debt repayment first before taking care of other needs. Prompt repayment will go a long way in helping you to overcome a bad credit history and also keep your budget from failing.
Disunity when setting goals
For a family budget to work, every member has to be in support of how the income is disbursed for different categories. If a family member decides to spend more funds than is allocated, the budget will have a high chance of being disrupted.
The whole family should take part in creating the budget as it will make them more committed to keeping to it.
A family budget, if properly written and adhered to, can make visible improvements in the financial status of a family.