Whether you are preparing to do some home renovations for Hari Raya; planning your family vacation; or getting ready to go to university – this is the ideal time to start thinking about your budget. Family budgets are an important factor of life. By planning, and setting up a family budget you will be putting your family on track to a successful future.
There are many people who spend their entire salaries and live from month to month, this is not an ideal situation. By setting up a budget you can delegate how much of your monthly salary is to be used for important payments, bills and every day necessities. When planning your budget you should always put some money aside into a savings account, even if it is not much, so if you have an unexpected expense you will be able to handle it with less stress.
It is extremely important that parents as well as children get involved in the family’s financial planning. By understanding how the household finances are managed, everyone in the family can then work together as a team to save more for the future.
1/ Start by keeping track of every expense
Yes! Many of you know that you should be doing this, but how many of you are actually keeping an accurate record of your expenses? You probably know how much money comes into your household every month; the puzzling part is usually trying to figure out what happens to that money. A good family budget will give you a clear picture of where your money goes and enable you to take control of it.
The first step is to track all of your family expenses, from the major obligations such as rent, mortgage repayments, car payments and utilities, to small cash purchases. Remember, those little cash purchases add up very quickly. For example, if a family of four goes on a trip to Miri once a fortnight, your monthly expenses should also include a minimum of: Fuel ($20), Two way Toll charges ($15), Accommodation ($70) and Food ($30) x 2 trips. $270 / Month. In addition to this, you should also take into account shopping expenses. So for instance, if you spend an average of BND 150 per trip, your total expenditure will be: Shopping Expenses + Basic Expenses -:BND 150 x 2 + BND 270 = BND 570 per month. Therefore your monthly budget should include this. For a month or so, make sure your family keeps every single receipt and writes down every purchase. This is necessary to see if you are operating over or under budget, and by how much.
It is most likely that you already know how much money you will have left at the end of the month. However, the itemised list of expenses will provide you with important information about your spending patterns. You can use this knowledge to take control and determine if there are any unnecessary expenses that can be eliminated or reduced.
2/ Budgeting tools make it easier
Interactive, on-line budgeting calculators can help you to plan for a variety of expenses and can be used to calculate everything from school expenses to holiday and retirement expenses. There are also many software packages and on-line account management services – some of which have features which will enable you to track, categorise and annotate transactions; while others offer graphs and charts to help you visualise changes in spending habits. These packages are designed to make budgeting simple, easy and convenient for you.
3/ Set achievable financial goals
A very important part of making your budget work for you is to decide what you want to achieve. Think about what is important for you, what are you trying to achieve in the next five-ten years? Brainstorm with your family about family goals. Write down your short term and long term goals. These might include buying a new house or car; paying off debt; building an emergency fund for unexpected medical bills and home repairs; or financing a university degree. Your objective should be to reach your goals without getting into debt; therefore you have to plan regular savings that are aimed specifically towards each goal. Make sure you keep your goals realistic and flexible. Don’t set them too high, or you will become frustrated.
4/ Tackle your financial challenges slowly, but surely
You would not be able to solve all of your financial issues instantly, but in time, if you remain committed to your budget you will see a gradual improvement. Here are a few suggestions -: Firstly, examine your expenses and look for items that you can reduce or eliminate, for example, eating meals out; shopping sprees; gym memberships that you don’t use. Secondly, you should always pay at least the minimum balance on loans and credit cards to avoid late charges. Thirdly, create separate savings accounts for long term goals and have the money automatically deducted from your salary each month. And finally, try not to borrow from one account to pay expenses in another.
5/ A successful budget is one that everyone sticks to
Once you have set your goals and your monthly savings, and cleared your bills from unnecessary costs, your budget tells you how much money is available for everyday expenses. Share this information with your family, discuss the goals with them and make a financial plan. Make sure that your family is an active part of the plan because if you work as a team and have the same goals, it will be easier to change habits and adjust to a less expensive lifestyle. It is important to review your plan regularly, every month or so, and ensure that it is feasible and flexible. If unexpected expenses occur you will have to make temporary adjustments to your plan to keep things on track while you get overthe hurdles.
AIA understands how important it is to have the financial resources that will allow you and your family to live the kind of life you want. To maximise your wealth potential, it is important that you have a plan in place to achieve your financial goals that requires both objective and expert advice. This takes into account your immediate, medium term and long term needs. For further information, please contact AIA Customer Service Hotline: (673) 2236743/2239114
This advice on family living is made possible with support from