Household Finances: Intro to the Basics

Finances. Every person alive has to deal with them, from nickels earned selling lemonaide at age 7, to wages earned at a part-time job during high school, to savings, bills, and raising a family. There is already much out there written by many people on managing various aspects of the financial picture. I’m even seeing pins showing up on Pinterest lately where average people are starting to share cost-cutting measures they have successfully implemented in their homes and businesses.

Why the sudden interest in saving a penny? The cost of living is going up but wages are not keeping pace. In fact, for many people, not only are costs rising and wages lowering, but jobs are nolonger stable either. The question arises then, how does a parent, how does a family care-giver still manage to pay the bills, put food on the table, maintain house and home, and ensure they can get from point A to point B?

First there are the basics which should be taught no matter where a person comes from in the financial ladder of life.

1) When you get paid, unless it’s only a few cents, divide the amount into three parts:
A) 10% charity
B) 10% savings
C) Spending.
Starting this habit early in life is a wise thing for parents to instill in their children. The child will get used to planning and budgeting the remaining 20% and carry that habit into adult life.

2) Learn to tell the difference between wants and needs. A need is something that absolutely can NOT be done without! When we look around the globe, basic needs consist of decent food, shelter, safe drinking water, shoes and adequate clothing, and a means of transportation. What many in modern cultures get mixed up on however, is the difference between healthy food basics and edible extras, the difference between decent shelter and the dream home, the difference between water and pop or that daily coffee habit, the difference between decent and extravagent clothing, and the difference between decent transportation and grown-up expensive toys.

For example: In the cracker isle at the store, cookies do not qualify as whole-wheat crackers! They should not be listed on the grocery list. On the MLS housing listings, a 5 bedroom 3 bath 4 car garage house does not qualify as adequate housing for a young family of 3. It shouldn’t even be considered due to the overkill on the mortgaging situation and the effort needed to maintain the place. Just like groceries and housing, clothing is another area where people have a hard time telling the difference between needs and wants. Decent clothing is dependent on the season and the purpose. A suit makes sense for that conference, but no sense for that construction job. It isn’t necessary to have 20 pairs of shoes in the closet when in reality, 5 will do the job just fine. I could go on.

When a person begins to tell the difference between needs and wants, budgeting becomes much easier to manage and stick to.

3) Learn how to create a household budget and stick to it! Doing this requires the knowledge of what is coming into the home in earnings, and requires knowledge of what is going out of the home in expenditures. It is a sad observation that most families aren’t sure of one or both lists in their own homes. Once you know how much comes in every month on average, and have made a list of what goes out every month on average, it is possible to draft a budget incorporating points 1 and 2 above, and learn the steps to maintain it.

Budgets change over time as income and needs change. Budgets also change as affordability of those needs change. So it is important to revisit your budget every so often to be sure you are staying within it and that it is covering all the bases adequately.

Once these three basics are in active use in the home, when the cost of living rises, it’s much easier to address and deal with.

frontcoversm139In my book, “Mom’s Little Black Book: Godly Advice for the High School Graduate”, there is a section on Groceries, and a section on Finances. Each of them contains a sample budget sheet aimed at teaching the young adult how to begin this road for themselves.

I’m available Monday to Friday from 9am to 4pm to help anyone with any of these three points, or to help you get started if these were never taught to you in the past. At only $.50/minute, obtaining household financial advice shouldn’t break the bank or be a hardship. Many people offering financial advice do so at outragious rates, figuring that such information is worth the pretty penny. But this author feels otherwise. Feel free to call: 1-888-MY-ETHER ext. 05040235

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