Dos AND DON'Ts TO MAKE FAMILY BUDGET AN EFFECTIVE TOOL FOR BETTERMENT OF YOUR FINANCIAL POSITION.

Failing to plan is planning to fail, I find this is the main reason why so many people at different stages in life are not happy about their financial position. First step in financial planning is making a “good” family budget, after seeing what Family Budget is I thought of stating some Dos and Don'ts which will help you make it an effective tool and a “good” family budget.

Dos,

1. Make a realistic budget based on experience and written down accounts for a few months if making the family budget the first time.

2. If not provided for then first provide for creating emergency fund. Emergency fund should be about six months of your average monthly family expenditure.

3. Make provision for lumpy expenses like a holiday,travel,annual subscriptions for clubs, property taxes,school fees, annual premiums for life and medical insurance,charity contribution and such like annual expenditures

4. Provide for PPF payments as a monthly provision as it suits many but paying PPF as early as possible gets you more interest and if paid before fifth of the month you get interest for that month also.

5. If you are new to family budgeting or your family budget has not matured enough to be stable keeping some cushion of say 5 % to 10 % of monthly expenses initially till the budget becomes more accurate after a few cycles of reviews and course corrections.

6. Expenses must be noted down daily.

7. Share the budget with your spouse and involve the spouse in the budgeting process.  

Donts

1. Don’t postpone or procrastinate and get down to making your family budget on priority basis.

2. Do not indulge in excessive generalization while making the budget and excessive aggregation of expenses while noting down the expenses daily.

3. Don’t trust or stress your memory too much and note down daily all withdrawals and expenses.

4. Don’t forget to account for direct payments by credit/debit cards or by net banking.

5. Don’t forget to compare your budget with the actual at the end of the month and analyse the variances and make corrections. This is very important.