A budget is nothing more than a written plan for how you intend to spend your money each month, how much you'll contribute to savings and retirement, and so on. A budget helps you live within your means. It doesn't have to be scary. When you're drowning in debt, a budget is your financial life raft.
Over time, if you stick to your budget and follow the rest of the advice in this book, your financial situation will improve. But even when your financial outlook is rosier, you should continue to manage your money by using a budget. Otherwise, you may get careless about your spending or begin using credit too much, and your debt may creep up to dangerous levels again.
Build up your savings so you have money to fall back on if you're hit with a big unexpected expense, if you lose your job, or if you have to take a pay cut.
Purchase big-ticket items with minimal use of credit. Help make your family's financial dreams come true: a new home, a great vacation, college educations for kids, a comfortable retirement.
Developing a budget and making it work is something that you and your spouse or partner should do together. After all, you're both spending your family's money. It's a good idea to involve your kids in the process, too. Sit down as a family and talk about why your family needs to live on a budget and what budgeting involves.
Share your current income and spending figures with them, let them know how much less your family needs to spend each month, and ask your kids for budget-cutting ideas, including things they are willing to give up. Also discuss any budget cuts you plan to make that will directly affect
them.
At the end of each month, sit down as a family and compare your budgeted spending to your actual spending. Celebrate if your family's spending is in line with its budget by doing something inexpensive together maybe ice-cream cones for all or a picnic in the park.
When your comparison shows that your family spent more than was budgeted, talk about why you went over budget and what all of you can do to ensure that it doesn't happen again. When your children feel like an important part of your family's financial team and understand that you value their input, they will be more apt to pull with you, not against you. They'll also be less apt to resent changes that may affect them.
You may be making up the difference between your total monthly income and your total monthly spending by using credit cards, getting credit card advances, borrowing money, writing hot cheques, paying bills late, or not paying bills at all. Stop doing those things! They're only driving you deeper into debt.
Deal with your budget shortfall instead by reducing your spending. Review your budget, looking for expenses you can trim or eliminate. Focus first on your discretionary spending because those are nonessential items.
For example, cable TV is not an essential expense. Likewise, you may be able to find a cheaper Internet provider (or go to the library when you need the Internet) and cancel some of your memberships.
If your deficit is small and most of it is due to waste and fluff, you may be able to move your budget into the black just by eliminating non-essentials. But maybe not. Instead, you may have to go through several rounds of budget cutting and do some serious belt-tightening before your household's total monthly spending is less than its total monthly income.
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