What is the best and most excellent way of budgeting financially in a home? (Weekly, Monthly or Daily)?
Answer:
This is a straight forward question but I will provide the following robust salient points as answers so that the unfamiliar can be acquainted with the terminologies.
1. Budgeting is a way of planning, making provisions, and making financial arrangements for future income and expenditures,
2. Financial budgeting in a home is to show how much money is coming in from all ends to the family and how much money is expected to be spent at a particular period of time in the future. The particular future period can be for only tomorrow (that is the next day), next week, next month, next year, next five years, next ten years and so forth.
3. Family budgeting is a tool, all things being equal and if applied with discipline, which can assist the family to successfully achieve their stated goals for such period(s) of time.
4. Family budgeting gives a sense of control over your finances.
5. How to prepare a family budget
1) Take a notebook and a biro. Though, you can always in the alternative use excel sheet or some other internet software if you’re computer literate.
2) List and write down all your expected sources of income – both husband and wife – for the period of time you intend the budget to be.
3) List and write down all your expected areas of expenditure – both husband and wife – for the period of time you intend the budget to be.
4) You can either use Zero-based budgeting system. This one assumes that at the beginning of the period intended there is N0:00 in your pockets, bank accounts, etc. Or you can start the budgeting with the amount of money in your account (or what you expect the account balance to be at the beginning of the budget period)
5) As a family, setting financial goals is very important because the whole essence of budgeting is to assist in controlling your funds so that you can achieve your goals
1) The short-term goals basis (e.g., what you have to spend yearly). These are some goals which are compulsory in nature that can’t be postponed till next year. Examples are food, child care, recharge cards, house rent, transportation, etc. All these fall within your current and immediate goals. Short-term goals could be how much money you would want to spend on each of the compulsory items within the period of every one year as a family.
As a family, depending on your type of work, business, carrier, etc. and the various sources of your income vis-à-vis your expected expenditures, you can still decide to break your family short-term yearly budget into
i. Bi-annual budget
ii. Annual budget
iii. Monthly budget
iiii. Weekly budget
v. Daily budget
vi. Hourly budget (This one can be very useful especially for people who spends anyhow on telephone calls. You can use hourly budget on your telephone calls say “not more than N100:00 per Hour on telephone calls”. This can be used to control your expenditures on telephone calls).
2) The medium-term goals basis (e.g., what you have to spend every three-year). These are goals that you consider as not compulsory but discretionary like buying “association clothes”, going on vacations, celebration of birthdays, etc. Much as these sorts of expenditures are necessary, they should not be forced on your family nor should you force them on yourselves. Medium-term goals could be how you would want to pull all your savings together within the next three years to purchase a tangible asset which would make your life easier as a family (e.g., purchase of a car). You can consider this as a necessity within the next three years because if by now you’re newly married, in three years’ time your children would have been nearing school age and you would definitely need a car to take them to schools.
3) The long-term goal basis (e.g., what you have to spend every ten-year). Long-term goal could be how much money you would want to have saved within the next ten years from all your incomes and investments in order to build or purchase a tangible asset (e.g., a house) as a family. It also includes what you would want to save towards your retirement plans.
6) It is important to state that money is fluid. Whatever direction you bend, it flows accordingly. To be able to spend more now, you will have to save and invest less; and to be able to invest and save more now, you have to spend less now. Secondly, you must define what you as a family consider are necessities and what are luxuries now. This will assist you in prioritizing on the scale of preference.
7) Finally, sum up the total of all the expected income you have listed; also sum up the total of all the estimated expenses you have listed. While the incomes of most families are fixed in nature, e.g., salaries, etc. expenses can be grouped into three different areas:
1) Fixed expenses: these are unchanging commitments like Tithes, rents, transports,
2) Variable expenses: these are changing commitments like Offerings, food items,
3) Discretionary expenses: these are optional expenses such as gifts, entertainments,
Deduct the total of estimated expenditures from the total of estimated incomes. You must ensure that your estimated expenses do not exceed the estimated income; if it does, then readjust each of the items on both the incomes and expenses.
Conclusion:
Family budget helps to prioritize on what to spend your money, helps to manage wastages, instils financial discipline, creates new habits of financial management, helps reduce stress and financial tensions, helps define between what are your needs and what are your wants and more importantly helps to develop savings and investments culture,
