Thursday, December 30, 2010

Budgeting for the New Year

The New Year is a great opportunity to revise the family’s financial position and set new financial objectives for family finances. Doing this will identify possible loopholes that might cripple the family finances. A review of the family’s financial capabilities will ease the preparation of a family budget, which is crucial for achieving financial freedom. No matter the family income, money problems are not brought about by overspending but by mismanagement of what is available. A family with a small income may be more financial savvy than a millionaire family, the key is in managing well what you have and this starts by drawing up a budget. Even countries with billions of shillings draw up a budget every year so that the money may be spent as intended.

Income and Expenditure

For effective budgeting all family incomes should be consolidated so that the true picture of the financial position can be ascertained. It is also prudent to develop reasonable assumptions and learn from past financial mistakes, your own and others. History has a way of repeating itself and some pitfalls if not addressed will recur in the New Year. Every expected cost no matter how small must be incorporated into the budget as well as all expected income. This is not counting chicks before they are hatched but rather planning for the expected income so that it is distributed in a proper manner.

A budget once drawn up is only as effective as its implementation so stick to the budget no matter the amount of temptation to deviate from it; this will ensure that one lives within their financial means and overspending is minimized or eradicated completely. Effective financial management demands that bills are paid up immediately they come up and credit card debt should be minimized if not done away with entirely.

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