Friday, December 30, 2011

Reeling In Family Finance

Governments may be able to cut budgets, but most of us with households have been dealing with less for many years, the best we can hope to do is shave our budgets.
     On this blog I talk a great deal about getting this, and acquiring that, and although I do include the more frugal approach to doing things, I don't often address where the money comes from in order to do these things.
I don't care who you are, whether you are mired in poverty or wealthy beyond your prior imaginings, everyone needs a budget. Even those who are wealthy, within three years have been shown to develop habits which tend to challenge their wealth. This is why many wealthy people have primary homes in foreclosure now, as well as those who are poorer or aspiring to be middle class. This is true not only of the US, but of many other nations as well.
             How do we make a budget ?  It starts with a listing of monthly expenses, including your mortgage or rent,all  insurance costs, food costs, phone, health care costs, electricity and other utilities, loan payments including student loans, and transportation costs. You should include some funds allocated for entertainment and some for maintenance of your home if you own it.   Then you list your total family income, after withholding taxes, and see where the trends are.  In the past, only 25% of your total salary should be going to housing, but since 1990, many people elected to spend more.  Seriously look at ways that these expenses could be shaved.  In my house, the electricity is higher than it should be, and we have instituted a strict "turn it off if you are not using it" policy.  In addition, you may wish to place electronic devices on a surge protector with a switch, so that you can turn off all the electronic devices in a room with the click of one switch.  Even low use items use more power than we think.   Hot water is a major cause of electrical costs for those families whose heater is powered by electricity.  In many countries, there is a switch which activates hot water for an anticipated shower.  Here in the US we do this less often, but an electrician can install a timer where hot water is set to be available for the hours in which your family showers or does dishes.

This is a programmable hot water heater timer.  This unit is intended for an electrical hot water heater, although there are a few units available which will do the same for a gas heated hot water heater. These devices must be installed by a licensed electrician in order to be safe.

  We saved a fortune when I had one of these installed in our first house.

               Seriously look at your budget and see what can be realistically shaved off.  If nothing else can, they begin to look at other ways of making some supplemental income.  The most important thing to do in advance of gathering "preparedness items", is to have an emergency savings account.  A family's emergency savings account should be liquid cash for emergencies.  Financial planners tell us it should be 3-6 months of household operational expenses put away for emergencies, and ear-marked for nothing else.  For years we lived without this, and for years we had difficulties when unexpected expenses surfaced.  So, you should ear mark some money from your budget each week for "Emergency savings account".
               After you have an emergency savings account, it is a good idea to allocate funds for "Emergency Supplies".  This is ideally the fund from which you can finance many of the things I talk about on the blog.
I will discuss more about family finance at other times.

Coins add up.....make no mistake.

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