Taking Charge of Family Finances
Family Money Manager

FE-222 (Revised)  Web-6-04
Debra Pankow, Family Economics Specialist

Money is an often-discussed topic in most families, usually centering on, "Where did it go?" More money is usually not the answer for solving financial concerns for most families. Instead, developing a plan for better money management will help most families feel more satisfied with their income and their progress toward goals.
 

Family Goals

Effective money management depends on the way a family chooses to live and the goals it plans to achieve. Think about where your family is today financially, and where you would like to be in five or 10 years.

Long-term goals — These "dreams for the future" are usually set for more than five years.

Intermediate goals — Usually these objectives would be attainable within one to five years.

Short-term goals — These goals are attainable in the next three months to a year.

Each goal you choose should have a specific dollar amount assigned to it in order to help make it a reality. The first goal for many families will be to set up an emergency fund. An emergency fund is usually living expenses for three to six months, to be used in case of an interruption in income. (See Chart 1: Goal Setting Worksheet.)

Getting Started

It's important to take a moment and assess the situation. The charts included in this section of the Family Money Manager will help you determine income resources, and your expenses. Look at Chart 2: Income Forecast. What is your anticipated monthly income? This is the amount you will be using to plan your cash flow.

For some families, taking a good look at their income, and seeing where the money is actually spent is enough to help them regain financial control. But others need additional help in the form of a money management program or a few visits with a professional financial counselor who can provide help with better money management. Financial counseling is available through a variety of nonprofit services (consumer credit counseling) and through military family support programs.

Planning to Spend and Save

Many families set goals and have dreams for the future. Taking charge of spending means knowing how much is being spent and on what items. A good recordkeeping system can make all the difference in making your spending plan a success. You might want to consider the following methods to achieve a realistic idea of how your money is being spent:

Tracking sheet — Write down your daily spending for a two-week period. On a sheet of paper, write the categories you need to track. Track categories that vary in amounts from week to week or month to month. (Example: You do not need categories like mortgage or car payment. Suggestion: Make the first four categories: food, eating out, snacking out and personal care). There are numerous forms, workbooks and even computer programs available to assist in this method.

Check register tracking system — Each expense is recorded immediately, with the balance kept up to date in a checkbook register. You can use the register to record checks, cash and credit expenses. For information on this system, see NDSU Extension Service publication, "HE-470: Taking Charge of Family Finances."

Calendar system — Use a calendar to track your monthly cash flow. Begin on the first day by writing down cash on hand or the balance in your checking account. Write your paycheck amounts on the appropriate dates. Then, write down when bills need to be paid or when you need to spend money for food, gasoline, school, etc. You will list the amount of your income and the bills so you can add and subtract as your progress. Continue this process through the month to see if you can cash flow.

Envelope system — This cash system lets each family member see how much money is available in each envelope or budget category. It requires little paperwork since the expenses are simply recorded in the envelope. Receipts may also be kept in the envelopes. The disadvantage for this system is that it requires keeping larger amounts of cash around the house, which may cause a security problem.

Whatever method you use to track your spending, it will take two to three months of records to come up with a projected spending plan. On Chart 3: Spending Plan Worksheet, list your current expenditures in the current monthly column.

Review the Plan

Now fill out the summary on the last page. Do your current expenses match your projected income? If not, it's time to adjust your spending, find new sources of income or both. If you have problems balancing your income and expenses, you may find it useful to talk to a financial counselor. Look in your local yellow pages under "credit and debt counseling" or contact your local extension office for services available in your area.

Any spending plan will need to be revised and restructured as your family's needs change. By regularly reviewing your family budget, you'll be able to compare actual amounts with the planned amounts. The more frequently you make such checks, the better your progress will be in reaching short-term and long-term goals.

Additional Resources Available

The following resources are available from your local office of the NDSU Extension Service to assist in your family money management:

FE-222a Financial Term Guide will help you understand various financial terms.
http://www.ext.nodak.edu/extpubs/yf/fammgmt/fe222a.htm   -  PDF Version (29KB)

FE-222b Spending Forecast can help you look at all your regular and irregular expenses on an annual basis.
http://www.ext.nodak.edu/extpubs/yf/fammgmt/fe222w.htm   -  PDF Version (33KB)

FE-222c Family Balance Sheet can help you take an overall look at your family's assets and liabilities. This sheet should be filled out on an annual basis.
http://www.ext.nodak.edu/extpubs/yf/fammgmt/fe222w.htm   -  PDF Version (27KB)

 

Chart 1: Goal Setting Worksheet

Short-term goals - up to 12 months    

1.       _________________________	$______	The total of short-term goals = ______
2.        _________________________	$______
3.        _________________________	$______	Divide by number of months = $______  required per month
4.        _________________________	$______
5.        _________________________	$______	Short-term goals =  $______ per month

Medium-term goals - 1-5 years   

1.       _________________________	$______	The total of medium-term goals = ______
2.       _________________________	$______
3.    _________________________	$______	Divide by number of months = $______  required per month
4.    _________________________	$______
5.    _________________________	$______	Medium-term goals =  $______ per month

Long-term goals � more than 5 years

1.    _________________________	$______	The total of long-term goals = ______
2.    _________________________	$______
3.    _________________________	$______	Divide by number of months = $______  required per month
4.    _________________________	$______
5.     _________________________	$______	Long-term goals =  $______ per month

Long, medium and short TOTALS = $___________(into savings account)

 

Chart 2: Income Forecast

Income Sources	Annual Income	Monthly Income (Divide annual by 12 months)
Earner #1 (take home pay)	$____________	$____________
Earner #2 (take home pay)	$____________	$____________
Family living from the farm	$____________	$____________
Interest	$____________	$____________
Dividends	$____________	$____________
Annuities/pension	$____________	$____________
Rent	$____________	$____________
Other (list) ______________	$____________	$____________
______________	$____________	$____________
______________	$____________	$____________
Totals	$____________	$____________

*Include only reliable sources

 

Chart 3: Spending Plan Worksheet

Your budget is a 12-month projected budget. There will be items you will estimate. Total yearly expenses should be divided by 12, which gives the monthly average.

DEBT REPAYMENT

SUMMARY

                                     Total Annual Income                                   $___________

                                     Total Expenses Income                               $___________

INCOME $____________  -  EXPENSE $____________  =  CASH FLOW $___________

See http://www.ag.ndsu.edu for additional information.

FE-222(Revised)  Web-6-04