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8:10 pm - Monday November 18, 2019

Budgeting As a Family Activity

| Budgeting, Psychology | Rating: 4.5
by Numan

Encouraging your family to take part in the budgeting process is crucial to its success

After a very short while budgeting actually becomes fun. You simply can’t wait to add up the numbers and see how you’re meeting your goal, how much money have you been able to save and how much debt you’ve been able to repay.

After another short period of time you begin visualizing you’re budget at every spending crossroad. You become dedicated and determined on meeting your goals at the price of postponing satisfactions and avoiding certain luxuries.

When the month ends you eagerly sum up expenses only to find your efforts have been foiled by seemingly uncooperative family members. “Don’t they know how hard I’ve been working to better our finances?” you ask yourself. Well, the most simple answer here, and the one I’ve obviously been aiming at, is no.

When we really take interest in something suddenly is seems the whole world revolves around that same thing. It’s a natural phenomenon as we now divert our attention to that specific issue. We, ourselves, are often surprised by the wealth of information and occurrences we hadn’t noticed before. Still, try to remember how it was before you read your first personal finance article. You were probably oblivious to this entire world. So will your family member be should you not include them in the process taking place.

Since our families play an integral part in our “family budget” the process of setting goals and budgeting must take place at a family level. Cooperation and mutual understanding are required for this process and way of life to succeed.
What are the necessary elements of any successful family process?

No change and no process can succeed in any organizational unit without the people that make up that unit. The same goes for families. Families are social structures made up of people.

Change in a family requires the same elements as any organizational unit to succeed. I believe the following draw a good outline of the required elements and atmosphere:

1. Cooperation – Without cooperation even the most gifted manager can’t succeed. We are always co-dependent on other people and on their cooperation.
2. Mutual Understanding – There’d be no cooperation with our mutual understanding. Each person has to understand the process and its general goals in order to identify with it and take part in it wholeheartedly.
3. Thoughtfulness – Especially true in families, thoughtfulness is most important and required for success. We must try our best to understand the need of the other members of the family without casting aside what might seem trivial to us. Lack of thoughtfulness will eventually cause the other members of the family to abandon the process and disregard it.
4. Compromise – An integral part of any process between more than one people is compromise. Conflicting needs and wishes need to be settled by mutual compromises. Compromise is a direct result of the points discussed above.
5. Positive Feedback – Often overlooked positive feedback is the one mean in which we acknowledge the other family members’ efforts and cooperation. Positive feedback is probably the best mean of education and reaffirmation and is so important I can’t stress it enough.
How to construct a family budget and goal setting process?

Having in mind the aforementioned elements we now incorporate them into a process of setting goals and creating a family budget. The process itself should include the following steps:

1. Laying the ground and creating the framework – The first step should include constructing a general budget outline and general ideas and goals. These will serve as a framework for the first family gathering in which the process will be initiated.
2. Discussing the process and the general mission – Acknowledging the importance of our family members, the second phase should include a detailed discussion of the process and a general, clear mission statement.

Explaining the process and its goals will create the required atmosphere for change. There’s always a place for allowing each family member to make suggestions and remark on what’s happening. Being heard is very important to us all. A process we can influence is usually process we’d like to be a part of more.

3. Discussing specific numbers and constraints – After the ground has been set it’s time to dive into the details. This will probably be one of the more difficult stages where each family member will try to protect their own as they might believe they are being criticized and scrutinized.

It is very important to keep an open and relaxed atmosphere and try to keep judgmental arguments to a minimum. It is also important to stress and point out our own little cost drivers and luxuries.

Another important part of this stage is to agree money has a limit. This is a powerful constraint that cannot be argued with. Use this as an anchor for the rest of the discussion.

Each expenditure will have to be analyzed in order to agree on a conclusion and a path towards goals.
4. Setting specific goals for the entire household and each family member – After agreeing on select expenditure and future plans and wishes goals need to be set.

Again, it is very important each family member has at least a couple of personal goals in order to become an integral part of the process.

Goals should be measureable and obtainable even if a bit ambitious.
5. Creating timely family meetings to review budget and goals – Timely reviews, such as monthly meeting to analyze the past month’s budget and performance have a key role in the entire process.

They serve both as course correction and as a constant reminder we’re not there yet. Positive feedback is encouraged throughout these meetings. These are also a place to constantly review the budget and maybe shift focus should sufficient progress has been made in a certain expenditure item.

6. Celebrating success and milestones – Often overlooked, celebrating milestones is encouraged in project management literature and in life as a whole. The process itself is never ending and it is very important to celebrate success in order to instill a sense of capability and reward.

I believe that every member of the household needs to be aware, in some level, of the financial planning of the family and contribute to achieving the family’s goals.

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