Monday, July 29, 2013

Reasons to maintain a family budget. How to structure it and who is responsible

I plan to publish my book "HOME FINANCES for COUPLES. Resolve Money Problems in Marriage and Learn Easy Steps to manage Family Budget" on August 20th, 2013.

At this blog you can taste pieces that are ready. 

Watch Video preview of Chapter 2  (30 seconds) at Youtube

Here is the extract from Chapter 2. "Reasons to maintain a family budget. How to structure it and who is responsible".W

...How to Structure The Family Budget

I have already mentioned in Chapter 1 that the best system is “ours” money. Let’s see how it works, by looking at this chart: 

I would recommend having at least two bank accounts for the family budget: a checking account (to which both partners have access) and a savings account. So, you would pay your bills from your checking, while your savings account is the indicator of your progress toward your saving goals. It’s just a basic set, most of the families I’ve met have more than two accounts.

In the previous chapter, I mentioned a monthly allowance for each partner. So, how will that work? Here’s how.

Here are some typical expenses for women: personal beauty (hairdresser, cosmetics), non-ordinary clothes and accessories (fancy dress, purse, etc.), hobbies and personal time with friends.

Here are some typical expenses for men: consumer electronics (smartphones, tablets, devices), sports, hobbies and personal time with friends.

Now, it’s time for a short Q&A session:

Is the monthly allowance a fixed amount or a percentage of income?
I’d rather stick with a fixed amount, as it simple and easy to understand.  For instance, set $1,000 per month for each partner. Keep it simple.

Should each of us get the same amount of monthly allowance?
Yes, regardless if one earns more than the other. However, if one of the partners specifically asks for less than the agreed amount, then why not try it? 

Do I need a personal bank account for the allowance?
It’s up you. From what I’ve seen, those who are employed usually do. 

How do we distinguish a personal expense from a family expense? Let’s say ordinary T-shirts—how would you classify them?
It’s up to you, as long as you are going to stick to it. The list is specific for each family; I won’t be able to create and enforce a home-accounting standard. Make a list. Introduce amendments and/or corrections within a certain time frame (annually is recommended). The Rule of Thumb is to have all emotional “little happiness” expenses come from the personal account.

As well, here is a reminder of the purpose of your monthly allowance: It seriously reduces the risk of financial fights over necessary/unnecessary purchases.
By the way, I would treat ordinary T-shirts as a family expense.

Exercise 2.1. Agree on the amount of the monthly allowance for “his” and “her” needs with your partner. 

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