UNL for Families: Budgeting Basics

Since school will be out soon and the kids will be home for the summer, families are concerned how they are going to stretch the family’s money. Creating a budget and following it can be helpful!

The word “budgeting” often gets a negative first reaction, but in fact, this process and the resulting budget are quite beneficial. A budget is a financial plan for spending, a tool families can develop to help them use their money more effectively.

As with many things in life, communication is key to developing an effective budget. It takes communication and teamwork to make financial planning work. Research says there is considerably less arguments when everyone shares in making financial decisions and where parents openly communicate with the children about the financial situation. When people have different values and attitudes about spending and saving money, or when people strive for unrealistic goals, there is the potential for conflict. If you don’t talk, even the most workable spending plan may not work.

For effective communication about money:

  • Arrange a regular time to talk about money in a location where not interrupted.
  • Clarify the issue at hand and stick to the subject.
  • In family situations, recognize that whoever earns the money does not have the right to  dictate how it is spent. Make money decisions as a team. Let each person freely state personal wants, needs, and feelings. Avoid judging or criticizing others.
  • Be willing to negotiate and compromise. 

It is important to sit down as a family and set financial goals. Short-term goals are what you want to have or do within one year, while long-term goals are what you can achieve during the years to follow. People who set goals are often more successful than those who don’t — they know where they’re going and what they want to achieve.

Here’s a few budgeting tips to help:

  • Keep it simple. Unless absolute necessary, don’t detail your plan to the penny. Keep track to the nearest dollar.
  • Be realistic. Consider all expenses, including vacations, spending money, alcohol, tobacco, and hobbies.
  • Build in a margin of safety in the budget plan by overestimating anticipated expenses andunderestimating probable income.
  • Keep working with your budget planning and record keeping until you find a system that works well for you.
  • Provide for personal allowances for everyone in the budget plan. A personal allowance, no matter how small, tells you what money is available to “blow” when the urge comes.
  • Don’t try to use someone else’s budget and expect it to work for you. Realize that those budgets on the internet and in magazines are for a particular situation that does not match yours. Tailor your own budget.
  • Distinguish between wants and needs. Buy what you need first. Put wants in the “what’s left over” category.
  • Borrow with care. Remember, you create a fixed expense each time you charge something.
  • Develop an emergency fund to help with unexpected expenses.

For more information about family financial situations go to: https://child.unl.edu/budgeting or contact your local Nebraska Extension County Office.