A family financial plan can save you

A family financial plan or budget carries a lot of weight and importance. Although many people don't realize it, it is this management of money it can reveal the shortcomings of your spending, will help you save money and allow you to meet future plans. The steps involved in setting it up are quite simple.

• Comparison of income and expenditure
• Design of objectives and financial strategy
• Compliance with the financial plan

Of course, unexpected situations can add to the family budget. These need to be adapted to and resolved. A typical example is when expenses exceed income. You can also incorporate into your plan investment opportunities.

Start from the very beginning

Before you start making a family financial plan, think about the most important things. How do you want to run it? There are several usable optionseach of which brings certain advantages and disadvantages. The chosen solution may vary by interest, generation and people.

Subject	Value
Pencil and paper	Cheap but laborious
Excel spreadsheet	Practical and for the more experienced
Mobile applications	Flexible and always with you
Envelope method	Conservative and simple

Everyone probably correctly guesses that a family financial plan is primarily about keeping track of income and expenses, which can then be used as a basis. If you write everything down on paper, any adjustments are laborious and often impossible. In this respect, the electronic form has the upper hand, which you can also always have at hand.

Family Financial Plan - Envelope Method

The envelope method is primarily a matter for our mothers and fathers. They didn't have modern means in their house, so they chose the the most feasible way. It should be noted that it has persisted to the present time. Some people like to return to the envelope method and consider it the basis of their family budget.

Under the envelope method, you divide the money into individual envelopes. These are described and each one is used to fund different things.

Mike P., Financial Advisor.

So you know at a glance how your family financial plan is developing and how much money you have left. On the other hand, there is a risk of losing the envelope and losing your finances.

Family financial plan - Income and expenditure

The next step in creating a family financial plan is the aforementioned sorting of finances. Make a thorough list of all income in your householdincluding various benefits, side income, one-off income, etc. The family budget has basically three main points.

• Revenue
• Expenditure
• Compare

Even within the expenses, you should not neglect on any of the important items. By the way, categorize these into appropriate groups, be it necessary, unnecessary, entertainment, household operating expenses and so on.

Family budget model

Everything may look quite complicated at first glance, but it is not. A family financial plan is primarily about comparing income and expenses. Put all your income in one pile and divide them according to one of the usual patterns. We will present one of them in the table below.

Subject	Value
70 %	Necessary living expenses
20 %	Short-term savings
10 %	Entertainment and other things

This is a rough family financial plan, which can of course take different forms. For example, you may encounter the 50-30-20 variant. More detailed family budgets with a 50-10-10-10 split, with each category allocated to a specific expense, are no exception.

Increase in revenue over expenditure

Logically, to be able to successfully set up a family financial plan, you must meet one of the most basic conditions. Income must exceed expenses at all costs. If this is not the case, change it. Without this basic definition, you will hardly reach your desired goals.

You can increase your income, for example, by getting a promotion at work, a part-time job or other types of extra income.

Mark S., economist.

Of course, you can approach the whole situation from the other side. If your expenses exceed your income, then work on reducing your expenses. Setting up a family budget It will also help you identify unnecessary expenses and areas where savings could be made.

The family financial plan must be followed

A successful family budget is all about sticking to it over the long term. Of course, it depends on how detailed you keep records of your income and expenses. Writing down every penny you spend can be more laborious, more challenging and often won't last more than a few months. However, the family budget can also be treated more benevolently. It depends on what goals you want to achieve.

• Update your budget regularly
• Adapt it to significant financial changes
• Set appropriate goals

The ideal family financial plan is one in which you have surplus funds. Set these aside at the same time and, in the best case, invest, save and appreciate any spare money.

Goal setting is the basis

Family budgeting is usually approached by people who don't get along with their finances or just want to pursue personal dreams. This undoubtedly involves setting a clearly defined goal. At the same time, adjust the family financial plan according to it to work towards the desired outcome.

Subject	Value
Objectives of the financial plan	Car, vacation, etc.
Implementation date	Months to years
Adjustment of the financial plan	With higher income and expenditure
Compliance with the plan	Only after reaching the goal

If you set goals that you will achieve in terms of finances over a number of years, you should adhere to and maintain a family budget. A change in your life situation in terms of money can bring you closer to or further away from such a goal, which needs to be addressed by adjusting your family financial plan.

Reserve plays a vital role

However you handle your own finances, focus on one essential thing at the beginning. And that is a financial reserve that should help you make ends meet for a few weeks or months. When you have an adequate financial reserve, you will also get a better sense of security.

As a general rule, the financial reserve should be such that you are able to cover all necessary expenses without regular income for at least four to six months.

Wilson P., financial advisor.

As part of a family budget, a financial reserve doesn't just have to act as a source of money when you're out of work. It can serve to covering unforeseen and higher expenses. A typical example is a damaged washing machine, electric boiler, car, etc.

Family financial plan and its evaluation

Regular review of the family financial plan also plays an important role. At least once or twice a month, check that the balance amount matches your records. Larger adjustments to the family budget are appropriate every two to three months, depending on how your financial plan evolves and how well you are able to stick to it.

Frequently asked questions and answers

As you can correctly guess, a family financial plan is nothing too complicated. On the other hand, it is a record-keeping exercise that to some extent requires due consistency. If you want to get more valuable information in this regard, read the following questions and answers.

A family financial plan for everyone

If you haven't yet addressed your personal finances in the form of a family budget, it may be time to give it a try. Bet on family financial plan and get your money in order. This will help you achieve your goals much faster.