Family budget: what is it and why make it?

The family budget is all income and expenses of the family for a certain period of time. Keeping a family budget allows families to save money and effectively manage income and expenses. As you know, according to the laws of money, a rich family is one where income exceeds expenses. It is this model of the family budget that allows you to save, accumulate, and then invest money in creating passive income. If we conditionally generalize, then there are three ways of managing a family budget:

1. Separated. This way of management assumes that each family member has his own income, which he uses for his own needs. Joint expenses are divided according to the agreement of family members. The advantages of such a budget are that everyone takes full responsibility for themselves. However, the negative aspects of a separate budget are potential quarrels between spouses regarding financial decisions.

2. Mixed. According to this model, each partner has joint and individual costs. For general expenses, funds are distributed jointly, and for personal expenses - everyone, as they wish. The advantages of this method are that there is an opportunity to use one's own income as needed, and the disadvantage is that someone must become the "chief accountant" in the family and clearly maintain family accounting

3. General or common. All expenses are paid from joint finances. Incomes are also joint and are deducted from the common "treasury". The strengths of this model are the unity of the family, because one of the spouses can earn more, and the other - not. Weaknesses include being able to agree on shared expenses, which requires good communication skills.

As for planning the family budget, the simplest method is the "envelope method". All items of budget expenses are distributed among separate envelopes, each of which contains the corresponding amount of income. And every time expenses for certain amounts are required, money is taken from the signed envelope.

Another interesting method of planning the family budget is the "jug method", which is an improved version of the previous method. Expenses are divided into obligatory, optional and unpredictable according to the articles. In addition, a jar of financial freedom should be provided, where funds will be saved for development and investment, as well as a "reserve" or "insurance" jar in case of unforeseen expenses.

Family accounting and family budgeting are inextricably linked with establishing long-term financial plans of families and determining their financial goals. That is why, drawing up and maintaining a family budget becomes an axiom of financial independence, and in the future, financial freedom of the family.