This article discusses family on a budget - family budget planning and Advice. Don't confuse family financial control with a penny-pinching budget. The purpose of control is to look ahead, to use many dollars that might be wasted.

In your family budget planning you should adapt two corporate tools: A cost-accounting system and a balance sheet.

Cost accounting controls spending by establishing yearly budgets. Base the budgets on past spending patterns and anticipated changes in costs, procedures, goals, and other factors. Purpose: Better financial planning. Don't track each expenditure down to the last penny. Look back only to get a better perspective on the future.

Main guide: A projected 12-month budget.
Recommendations:
Every month, compare actual expenses with the planned amount. Note deviations.
Change your spending pattern or program. Implementing budget control requires
everybody's cooperation. Steps to take:
Set realistic short-and long-term objectives.
Estimate the sums you have to set aside regularly to achieve your goals.
Estimate income for the year. Include savings' interest, stock dividends, pensions, and money from all other sources. When income is irregular, as may be the case for sales and professional people, estimate a yearly minimum. Divide the total into equal parts over selected budget periods (weekly, semimonthly, or monthly). See family budget for more information.

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Spread fixed expenses. Total the year's periodic bills (taxes, rent or mortgage payments, utilities and heating fuel, insurance, association or union dues, installment loans and purchases, tuition, etc.). Divide that sum by the number of budget periods. Purpose: To eliminate the diversion of needed cash and last minute scrambles to pay large bills that should have been anticipated.
Estimate flexible expenses. Prime ones are clothing, furniture, equipment, charities, medical care, gifts, and entertainment. Include an emergency fund to make up for wrong guesses on costs. Spread the total evenly over the budget periods.

Estimate regular living expenses. Among these are personal allowances, food, household supplies and help, laundry, dry cleaning, automobile maintenance and other transportation, newspapers and magazines, postage, and entertainment. To make a reliable estimate, record actual expenses for several weeks or longer.
Plan to pay old bills. Include loans from friends or relatives, as well as installment debts. They should be spread, where possible, over future budget periods. Pay them as quickly as feasible to maintain good credit, good family and social relations.

Prepare a tentative budget. Match total expense (about the same for each budget period) against income.

How to use the program: Treat a surplus of income over expenses as a saving toward meeting future goals. If the surplus is tiny, or if it is a deficit, trim expenses. It may be necessary to temporarily increase income by seeking extra work. Each family member should help develop cost-cutting or income producing ideas. Children may take on chores that had been done by hired help. Even some fixed expenses can be trimmed temporarily.

Bottom line: Once you establish a cost accounting system, keep it flexible to allow for changes in financial status, family size, attitudes, or interests.
The balance sheet shows net worth, the value of all assets less liabilities. Purpose: Year to-year comparisons of balance sheets mark your family's economic progress.

A satisfactory rate of growth is not necessarily enough. Make certain that the growth in specific assets applicable to your overall goals is adequate to achieve them.

Time saver: Banks generally use balance sheet forms to measure the financial substance of potential borrowers. Your local bank may be willing to give you a few blank forms for your personal use.

Source: Consumer Information Center

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