In unstable and volatile economies, such as those faced by most Latin American countries today, people must organize their income and expenses in as much detail as possible. To achieve this goal, drawing up a family budget is crucial, as it not only allows the group's finances to be organized, but also save money in times where obtaining it is becoming increasingly difficult.
“The family budget is a procedure through which planning and control of the financial accounts of a household is carried out, including expenses and income,” explain financial management specialists from South American SA"This type of budget provides information on the difference between income and expenses in a household, giving a final balance. If income exceeds expenses, the family will be in a surplus situation, equivalent to the profits of a company, and with the ability to save," they add.
The income that is included in the family budget can be salaries, extra pay, investment income or grants. While expenses can be divided into several categories. The fixed, everyday expenses - including food, electricity, water, gas, telephone or medicines - which, although necessary and cannot be eliminated, can be reduced to a minimum. On the other hand, there are monthly expenses, such as the mortgage, community fees, insurance or car loans; and also discretionary or dispensable expenses, normally related to leisure, such as club membership, vacations or going out to parties.
“Income and expenditure surveys, also known as household budget surveys, are an essential tool for understanding how people obtain their economic resources and use them to acquire goods and services,” highlights from the Economic Commission for Latin America and the Caribbean (ECLAC).
They add: “In most countries in Latin America and the Caribbean, this instrument provides the information that serves as a basis for, among other things, updating the consumer price index (CPI), constructing the institutional account of the household sector of national accounts statistics and determining the composition of the basic food basket and the threshold value of the poverty line.”
How to make a family budget
When looking at how a budget can influence a family's economy and the benefits it generates, it is a crucial tool to implement. However, Taking the initial step to use them is not always easy.“The first thing to do is to make a list of household expenses and assign an estimated monthly amount for each of these items. You can start with a list of fixed expenses, such as rent or dividends, and then with expenses for basic services such as electricity and water,” he says. Maricella Álvarez, Assistant Manager of Customer Experience and Relations at SURA.
“Then you should continue with the variable expenses such as, for example: transportation, food and clothing. You should always leave an estimated amount for extra expenses and also consider an amount for fun, such as going to the movies, or going out to eat at a restaurant. restaurant", keep going.
Along these lines, the expert also highlights that “the important thing is that our income is enough to cover all these expenses.” “We should never forget to consider an item for health issues. If it is not used, it can be saved or allocated to another expense. It is also recommended that families who have the ability to do so save a monthly amount of money for a vacation trip or for their children’s higher education,” says Álvarez.
What are the mistakes to avoid?
Once the family budget has been drawn up, The next step is to fulfill it month by monthThis can also be difficult to carry out, since the economy of a group of people is complex. Both income and expenses can change periodically, so it is common for failures to appear on a daily basis.
“In order to avoid making mistakes when estimating the budget, we can save receipts or see the expenses that appear on bank statements. This is useful to ensure that the budget includes realistic amounts,” says the Assistant Manager of Customer Experience and Relations at SURA. She continues: “On the other hand, extraordinary expenses should always be considered, since these always occur. Such as, for example, the purchase of medicines for an illness or the purchase of gifts for a family member or friend’s birthday, for example.”
If you manage to establish a long-term family budget, you will see several benefits. “One is that you can manage your money better, know what you really spend and generate savings where we see that we are not using the budget well,” says Álvarez. “On the other hand, by creating a budget we will know what we have available and thus we will avoid getting into debt and paying high interest associated with credit,” he adds.
And he concludes: “Finally, if money is well managed, the person, couple or family will know if they have the capacity to save to acquire goods with higher costs, to change the car, for example, or if they can treat themselves to a nice vacation.”
Through valuable content, in SURA Insurance We want to help people and families develop a financially healthy economy. Our goal is to bring the vision of our experts, who advise hundreds of people every day, to all homes for free. A well-prepared budget can be the first step to improving household accounts and improving quality of life.