Saturday, June 27, 2015

Budget Quiz answer to Question 2: What are the two keys to budgeting?

The two keys to budgeting are (a) negotiating and (b) preparing your plan (budget) in the quiet of your home and not when you are making a purchase.
(a)        I believe every person that your income supports should be given spending guidelines and should be able to negotiate, based on facts, the guidelines. When my two daughter’s expenses were a part of my budget, they are now 42 & 40, they knew they could negotiate with me. For example, when they were in college, I gave the $50 month for spending money to purchase essentials they would have normally found at home, like tissues, toothpaste, or toilet paper. The understanding was that if they needed more than the allotted $50, and they could show me proof, I would increase the amount of their spending money. There are three other examples I can share. When they were going to a prom, and I thought it important for them to look nice at the prom, I paid 100%. When they wanted to buy a high school jacket, we negotiated that I would pay 50%. On the yearbooks, I only paid for their senior yearbook.
My daughters were provided a clothing allowance until they graduated from college. They charged purchases on their personal credit card, with a reasonable spending limit, and I would pay the credit card bill until they graduated. Then they got a new credit card for which they were totally responsible. When at school, they would call me when they were going clothing shopping and ask me “How much money do I have in my clothing allowance?” Knowing that, they could make purchases within their allotted and negotiated budget allowance or repay me for any overage from their funds.
These are just a few examples to help you understand the concept. Even younger children can be taught this concept. If you can only afford one after school activity, like soccer, cheering, dance, etc., your child can be part of the process to select the one activity.
(b)       Preparation of a budget is a serious matter and thus should done in a quiet environment with paper and calculator or computer. When you go to make a purchase, you should know how much money you have in the category where that money is listed. Purchasing decisions should not be made emotionally in a store, but based on what you have previously decided or previously negotiated. If you budget does not have enough money set aside, the purchase should not be made. NOTE: Budgets can always be adjusted, but not in the store.

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