Family Budgeting the SMART way

By Hanan Awaad 

Hanan Awaad Editor-in-chief Corporita Magazine
Hanan Awaad
Editor-in-chief
Corporita Magazine

I am not an expert in marital or family relations, and I do not claim to be able to offer advice in this regard, but I am very observant and I recently I became aware of many conflicts and problems between couples about financial expenses. So I decided to talk about these issues based on my life and my personal experiences, along with the information I got from studying and working.

Before we go into solutions to marital disputes related to financial problems, I must emphasize that the problems I will deal with are real challenges and the real reason for them are differences over the money. Sometimes the stated cause is different from the actual cause of the marital dispute. There are cases in which marital disputes revolve around other topics, while neither spouse can determine the exact reason, understanding or explanation of the conflict.

The majority of people believe that solving our financial problems is in earning more, and this perception is just a perception.  We all know someone or a family when their income increased, so did their problems, and ultimately they lost important things, and the happiness was sucked out of their lives. Moreover, the advertisements around us and the marketing campaigns drive us through brainwashing and manipulating our feelings to buy what we do not need.

If you and your partner have a problem with expenses, if you feel that your husband is stingy or that he does not spend as much as he can in the house then, it is necessary to pause and frankly discuss with your life partner what is happening –Heart to heart. Clearness is the starting point

Many of the marital problems are a direct result of misunderstandings between spouses. Perhaps the wife is not aware of her husband’s limited income, or maybe, it’s her skill in managing the house that is limited. Some couples hide their income from their partners, and then the partner feels a sense of betrayal and distrust.

Planning

After the reconciliation between the spouses, the role of planning the family budget comes, and this step must be done in cooperation between the spouses. All we need to prepare a family budget is a pen, paper and an hour’s allotment at the beginning of each month.

The most reliable way to plan a family budget is to plan the budget from zero, known as Zero Budgeting. Write on a piece of paper all items of expenses necessary to live a stable life; then determine the amounts required for each item. Things I propose are: rent or home mortgage premium, electricity and water bill, car allowance or transportation cost, vehicle gas cost, clothing, food, gifts, charity (or donations), school expenses, petty cash, internet and telephone subscriptions , cinema, excursions and holidays, emergency fund, debt repayment, savings, medical expenses, other expenses.

Cooperation between the spouses in the planning of the family budget will ensure that both parties are acutely aware of the needs of the house and the family and the reality of the total income, and also an excellent opportunity to communicate.

Setting Priorities

In conjunction with budget planning, we need to define and agree on the lifestyle and preferences. For example, paying the rent is more important than buying new clothes, or food expenses are more important than the phone and the internet, so it is necessary to practice economy. Discussing planned amounts for each item will determine the standard of living of the family, and then decisions can be made to adjust the plan such as reducing trips to the mall and going out with friends and directing this budget to other items.

It is also important to set financial goals for the family. For example, if the couple wants to buy a new car, all members of the family are aware of this shared long-term goal and the plan to achieve this common goal. Or the family may want to spend a summer vacation at a particular resort, which entails an extra cost, or perhaps the house needs some repairs or new furniture.

When deciding on financial goals for the family, I always recommend using SMART Goals. This planning method is inspired by the business world, where the goal must be specific, measurable, attainable, realistic and time-bound. It is not enough to decide to save money, but also to determine the amount to be saved and when we need to save it. It is also important that the goal is acceptable to all members of the family and commensurate with the real potential of the household.

It is important not to compare the situation of your family with other families, because each house has its own priorities and nature, different income sources, different goals, etc.. It is imperative to involve children in some discussions related to family finances as appropriate to their age.

Tracking Expenses

The next step is to track expenses, no matter how small and insignificant. There is a principle in personal financial management called the Latte Factor, and this principle simply means that if you spend $ 3 or $ 4 a day to buy your favourite coffee, the total amount at the end of the year is so substantial that if you invest it, you will earn profits. By changing some daily habits, we can save a lot of money. This brings us back to the principles of economy and saving that our parents and grandparents have always spoken about …. “switch off the light of the room if you are not there” …..or “do not put more than you can eat on your plate. “Small expenses at the end of each year accumulate large amounts that we can make available and repay debt or invest them.

Planning for Seasonal Expenses

We live our lives in seasons … Back to School… Haloween … Holidays … Christmas … and so on. Such seasonality means that we should not be surprised by any future financial commitment because we are aware of it ahead of time. So, when planning the budget, we may need to put a small amount aside for those seasonal expenses.

Emergency Fund

The last point I would like to talk about is the emergency fund. Of course no one wishes to be surprised by a situation of urgency such as unexpected repairs at home, a car accident or a problem, but unfortunately, life is full of unpleasant surprises. Therefore, a small amount should be allocated for such circumstances. It is a prudent spouse who does not request this particular amount for emergencies and crises to spend on a holiday or a fancy meal.

Last Words

I always remember the old Egyptian proverb: “The house of the desolate shall be destroyed before the house of the oppressor.”If you neglect to plan and manage your finances, your house … no , your life might collapse. Take a step and be in charge of your family financial well-being.

Originally posted 2017-09-21 14:50:34.

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