Couples and single parents believe they are running their family money needs properly by just budgeting. It is a wide practice by people that, when it comes to family money needs, we don’t really handle it as we will handle other financial issues. Most of the time we just spend money to meet a needs as they come. We claim we are managing our family financial need very well by providing for their basic needs. Of course this is the hallmark or the desire of any parent but the manner at which we carry it out is killing our overall financial success. Expert and experience has taught us that, throwing money at needs is not necessarily the best financial practice. Most of the time when it comes to family needs we just budget, this is a good start but it is not the best solution one could employ.
What is budgeting? What is financing? Budgeting is not financial management but is a financial art needed to have a successful financial life. Budgeting means, plan on income and expenditure. Successful financial life is not just about planning on how to spend your income on expenditure based on your scale of preference. Finance is not budgeting: finance is management of money and money resources.
We need to use financial principle in resolving family money matter and not just budgeting. If your spouse said this, “Honey we need to buy a new washing machine”, your likely reply will be, “put it in the next month budget, so that we get a quick replacement”. That is budgeting. Let cite another scenario were your personal assistance said, “Sir, we need a new van to move our goods and services”. You are likely not to reply by saying, “Put it in the next month budget”. You will want to know why we need a new van. What happened to the old one? If any, can we still use the old one for a while? Is there an alternative? Do we really need a new one now? Lastly can we afford a new one? A financial intelligent person will seek answers to this and many more not necessarily because he is stingy but because he wants to be financially prudent. When it comes to family needs, the only ready question that comes to your mind is that can we afford it? If answer is no we then ask another question, how can we afford it? In day to day business we consider other factors mention above before considering affordability.
Many people are financially prudent in issues, except in family financial issue. Outside the four walls of their home they are financial genius but at home they are financial dummies. They make all the money using financial management principle and squander it at home and they wonder where all the money had gone to.
With a little financial prudent at home you will be surprise how much dollars you will keep in your pocket. Please ask yourself this question, why do home related appliances and consumables sell fast? The answer is simple because they know that when it comes to meeting home or family needs people could easily become financially daft. Wake up! Apply what you have learn in the day to day running of financial life into your family money needs.