Today we have a guest post for you from fellow blogger, Jon.
If you have ever worked in an office, you have probably been part of a budget meeting at some point or another.
These are often not positive environments. First of all, they can tend to be exhaustively boring, especially if you are not one who enjoys numbers. If they’re not boring, they are rant sessions, where the boss talks about how tight the budget is and he or she will be admonishing everyone in the room for being grossly over budget or right on the edge with still half the fiscal year left.
Yes, I’ve been in those meetings before too.
Misery Loves Company
These meetings are a great way for a supervisor or manager to pick an entire group of people for scrutiny over spending habits, but it sometimes can be used as a ruse to discuss other matters. And why single out just one or two people for such a discussion, when you can talk to the entire group and not make your criticisms specifically personal?
To be fair, it’s true that not all of these meetings are negative, and of course not all of them are about the budget. Every once in awhile there is a meeting with someone or a group of someone’s who gets a pat on the back for a job well done.
The Family, Inc.
Budget meetings and budgets are often part of every company’s office business. But have you thought of such meetings for your family?
After all, your family has a budget. Your family is a business, in a way you have expenses and investments as well as income and revenue to fund those expenditures, and you have goals of making profit so you can expand your options for how to spend your money and save for a rainy day later.
Budget meetings are sometimes necessary in a family. Maybe not as often as in a corporate setting, but if you have a budget, you should always have some kind of meeting to make sure all in the family are on the same page with money and where it is going.
The Casual Budget Meeting
With a family budget, there are really two types of budget meetings. In most families, one adult usually puts together the budget at the beginning of every month, then there is an informal budget meeting where one adult shows the budget to the other adult(s) in the household, and the budget is discussed, shared, and requests or suggestions are made.
For example, let’s say the husband is the one who pays the bills and fills out the budget at the start of every month. He fills it out in pencil, covering every category necessary, then shows the budget to the wife. The wife remembers that she has to buy several birthday gifts for family this month, and she might ask for a little more money in the gifts category, or she might want more money in the clothing budget because she’s worn out a couple of blouses for work.
At this initial budget meeting, the wife sees how much was planned for each category, and if she wants or needs more money in a category, she will request it and the spouses will work together to add money to one category and take away from one or more categories elsewhere in the budget so the budget still zeroes at the end. Once the discussion is over and the budget is adjusted appropriately, the adults in the home bind themselves to that budget as written.
The Emergency Budget Meeting
You have made the budget at the beginning of the month, you are bound to it and now you live your life. Two weeks later, you get the news that you have a termite infestation, or that your hot-water heater is on the fritz, or your car needs a major repair. You might have been putting aside money for one of these things, but maybe the repair is more than what is in your budget.
Let’s say you have been putting away some money for home repairs, and you have $1,500 ready but the hot-water heater will cost $2,000 to replace or repair.
It is time for an emergency budget meeting, not time to break out a credit card.
If you find yourself in this scenario, the emergency budget meeting may be a necessity in your home. In an emergency budget meeting, the two spouses sit down with their budget and they realize their problem. They have $1,500 saved for this emergency, but it will cost $2,000 to cover the emergency, so they now have to go through the budget line by line and find the $500 they need.
This process involves going through with a fine tooth comb, perhaps taking $50 here and $75 there. Maybe the husband can’t buy any new dress shirts this month, and maybe the family eats generic store-brand food this month, or you agree to swear off Starbucks or restaurants for the month.
Knowing your priorities are housing, utilities, food, transportation and basic clothing, you make the changes to the budget to secure that $500, agree to the new budget, then move forward. You can clean the slate the next month, and perhaps restore some of the money in certain categories that you sacrificed previously.
Budget Your Time Early
Emergency budget meetings are supposed to be just that, for emergencies. If you are new to making a budget for our household, you will probably have several emergency meetings while you work out how much money you actually spend in certain categories, and as you likely have a smaller emergency fund to protect you from those emergencies.
However, as you get two or three months into the process, the initial casual budget meeting will likely cover most of your needs and concerns so that you will have the money in the budget and in your emergency fund to take care of those crises. And eventually your emergency fund will be big enough that you won’t need a meeting, because the money can be taken care of without adjusting your budget by a single dollar.
The budget and the emergency fund are two tools that work together to help you get the financial freedom for which many of us wish. And we don’t have to be a millionaire to get there, either.
Jon writes at Penny Thots, a personal finance blog that helps readers improve their finances one day at a time.