Why it’s so important to have a family budget (and tips for achieving it)

Let’s say you have a business, a business, a project, a business, a start or whatever you want to call it: for this to have any chance of succeeding, it is extremely obvious that you need to have an organized budget and therefore know how much money is coming in and how much is going out monthly.

For the household finances of a family, a couple, or even an individual, it’s not that different either. At least that’s what Hector Osorio, an economist at the consulting firm, thinks. PkF . “It’s vital: beyond helping us see how much we’re going to have and how much we’ll have spent at the end of a period, it allows us to think about how our income and consumption is structured.”

From a more holistic point of view, Osorio assures that making and managing a budget “helps us to know our family better and to structure what is vital and what is superfluous in terms of expenses”.

Along the same conceptual lines, Yasna Amaro, personal finance expert and psychologist at dream om believes that an orderly budget allows us to achieve true “financial freedom”: by knowing how much money we have after meeting certain financial commitments, we can be clear about when and how much I can spend and so don’t go into debt or go over-indebtedness.

This all sounds great, but what does it take to be able to maintain internal financial order? And why, if it is so beneficial, is it also so difficult to achieve?

Santiago Jasmine (@santinversor ) is a personal finance specialist. According to him, establishing and maintaining a family budget is the first step to achieving the desired “good financial health”.

“It’s a tool to get organized and live better.” But Jasminoy believes that “in most households this budget is not kept, which explains the financial mess in which we live”. Apart from certain factors, such as low wages or the relentless increase in the cost of living, one of the problems, he explains, is that “in colleges and universities, we teach how to work and generate money, but we don’t teach how to deal with it. We work several hours a week to earn money, but we don’t just spend an hour a week seeing how to manage it better,” he criticizes.

Yasna Amaro agrees: The problem, she thinks, is that we start working life without knowing a lot of basic information about personal finances. Additionally, parents rarely teach or counsel their children about their financial models. “Without a doubt, this is an adult problem, but a teenager must understand what the family strategy is in economic matters,” he says.

“Since we were children, we have been taught that it is ugly to talk about money. I disagree with this: I think that if we are going to expand or think about buying a house, the whole family must contribute and help reduce expenses, because together we are going towards a goal”, says Aurora Sepulveda, accountant , consultant and creator of @lacontadora.cl , a popular platform where she educates and informs about financial matters. “I teach my children that they have a budget: that there is a limit and no more.”

In this sense, the lawyer Ricardo Ibáñez, from Defense of debtors , advises, educates young people. For example, by favoring the use of debit cards over credit cards, and to believe again in the benefits of saving. The idea is to make them aware that borrowing “must result in something that remains in time and must be reserved to generate more income, such as studies or a trade, or something whose price increases with time, like real estate”.

More than the format, whether analog or digital, the most important thing here is rigor and discipline. “It takes constant work,” says Héctor Osorio, probably the reason most don’t last more than a month after a budget.

“Firm constancy is required, registering all movements. Keeping records and a family budget isn’t so easy at first,” he adds, but it’s a habit that can fit into life just like exercising or keeping the house clean. Nor should we exaggerate or keep every receipt of what we buy, but should record at the end of each day how much was spent and for what.

Aurora Sepúlveda thinks the biggest advantage of having a monthly budget is transparency and information. “Knowing how much we spend and on what things allows us to know if we can skimp on this or that item and thus save: whether it is to have a mattress for the unexpected, to afford a little luxury, to go on vacation, to expand home or whatever,” he said.

But few people do, he says, because “we lack financial education. Understanding these concepts does not make us aware that it is not enough to hoard, consume and save money, but it is important to know how to invest in recognized financial sources so that it pays off,” he advises. .

“The main benefit of a family budget is to identify big money leaks from the house, if any,” says Jasminoy. “In this way, we can effectively know where to reduce expenses and increase savings capacity, which is very important in case of debts.”

The relevance of a budget increases in times of inflation. Commodities and inputs continue to increase each month and with an expense structure it is easier to identify these increases and offset them by reducing other less essential expenses. That way, says Jasminoy, it becomes less necessary to use the emergency fund, and any type of eventuality — health, housing or otherwise — can be covered without needing to go into too much debt.

Another virtue of a family economic budget, according to Osorio, is to better understand the family or personal income and consumption system. In his experience, debt, especially among young professionals, is often the result of poor spending habits or ignorance of their priorities. “By having a budget, we know each other and we already gain from it,” he says, “because it allows us to make good decisions to modify or project over time.”

For Yasna Amara, psychologist and personal finance expert, the biggest benefit of keeping a budget is being able to plan financially. Knowing exactly what resources are allocated to each thing is very important, because it gives us peace of mind – not fear – every time we review our account, and because it’s the only way to build a habit. ‘saving.

“We have a generalized bad habit of not allocating resources to savings. It must be a habit from the moment you receive an allowance, and consolidate once you enter the world of work, to then program it into the family budget, ”he advises.

The ideal, he says, is that one should “hopefully have more than one savings channel, for different purposes and different conditions. And as for the debts, they must also be visualized and planned: to be clear how many and what they are, how long they last and what interest we have to assume. It’s the only way to find strategies that allow you to comply with them and then overcome them,” he concludes.

Aurora Sepúlveda thinks that recording expenses by hand, with a pencil on the paper of a notebook designed for this purpose, can be a very useful tool. In this way, we devote time and attention to the budget, and we do not forget it among the dozens of browser tabs.

It is proven that writing data manually, with our own handwriting, helps to remember it better than if it is recorded digitally. With an expense book we can keep them in memory for longer, without having to depend on the computer or mobile phone.

Of course, it all depends on what works best and benefits everyone. Whatever the format, the most important thing, as Santiago Jasminoy says, is to worry that ultimately the expenses will not exceed the income.

“It is very important to be very clear about the amount spent on electricity, water, gas, rent/dividend and food,” he explains, because these bills cannot be carried forward. But equally essential is to keep track of what he calls “ant expenses”, those three or four thousand pesos a day in snacks, drinks, coffee or whatever, which adding up can give more than a hundred thousand pesos a day. month. . “With the use of the cards, in addition, there are many expenses in which the money escapes daily”, he adds, among which the subscriptions to services that we do not use as much or the consumption on the Internet of things that we don’t really need.

As the details can be numerous, perhaps the simplest is to have a data sheet. On the Internet, it is easy to find some that are already formatted —like this one from investment manager Fintual —, to which it suffices to add the personal expenditure figures. “I use Excel to jot everything down and I keep track of expenses, income, and even a plan for what the year will be like,” says Jasminoy. “But everyone has to find the tool that suits them best.

For people closer to technology, he recommends applications such as Fintonic or Monefy, which allow you to manage and control expenses from your mobile phone. At Práctico, we’ve tested the most popular apps of this type and found Wallet to be the most convenient, reliable and easy to use. Not only that: it’s also great for comparing expenses and balances month by month, generating projections, and setting savings goals.