How do you budget for your family finance?
Money and finances are said to be one of the greatest threats to destabilizing a family.
Many expert claim that finance is one of the major factors in causing a divorce or break in a family.
How can you avoid this demon that can easily raise its ugly head and upstage your wonderful family?
Well Patrick Munroe, a registered financial consultant (RFC), share a powerful secret on how to effectively budget for your family.
It is called the envelop system.
What is the envelop system and how to you implement it in your family finance?
It is simple to do. You don’t need a degree or any formal education to execute this envelop system. The only thing required for this is the will to implement it and the discipline to consistently follow it until it becomes a habit.
All you need to do is to get a series of envelops and name them according to the major needs or aspiration of your family.
So one envelop would be grocery, telephone, clothes, holiday, gas, electricity etc. You then physically place an allocation of money in each envelop for the month.
According to Munroe this helps you to know where you money is going at any particular time.
“If you see things getting ahead of themselves, then you can pull back and make sure you are getting your [family budget] back into line,” he explains.
How can you do this when most of us do not use cash anymore and most of our payments are direct debit – that is it is automatically deducted out of our bank account?
Unfortunately this way of spending money does not help us to keep track of our money easily. What you can do is to have a combination of both systems. Leave or put enough money in your account to pay all your direct debits that you must have (mortgage, insurance, debts etc.). Take out cash for all other expenses and use the envelop system.
A friend of mine told me how he used the saving tin system. He would save or put money in various tins earmarked for different spending projects (holiday, car, clothes etc.) He would only open a tin if he had to. If he did he will take exactly what he wanted and immediately get a new tin and return the unspent money in that tin. The tins can only be opened by cutting them open which renders them useless after that.
This will go a long way in helping you get your family finance under control.
It may not be easy at first however if you stick to the plan you will find it very useful in not only budgeting your family finance but also good for saving.
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