Planning Strategy of Family Budgeting

Spending on tobacco, on the other hand, went down 35% to $530 a year in 1996. A deep cut in tobacco taxes accounts for most of this trend, although the number of people spending money on tobacco did drop slightly to 44% compared with 47% in 1992.  But households spent slightly more on alcohol — $620 per year — with 80% of households reporting expenditures on alcohol.  Spending on clothing slid 5% to $2,100 on average, continuing an eighteen year downward trend.

Statistics in some places said that it reported that spending on recreation climbed 15% to $2,600, or 15% of the household budget. Much of the increase was spent on recreational equipment which covers items such as toys, computer equipment and photo supplies, as well as sports supplies.  Spending on entertainment, which is included in the recreation budget, rose by more than one-third to $430 in 1996, driven largely by increased cable TV charges, but also in part by increased spending on admission to theatres, live performances and concerts.

A Comprehensive Financial Plan

Essentially, a comprehensive plan — whether one is preparing it or hires a professional — provides an individual or a family with a set of plans and recommendations to follow to reach a variety of specific financial goals.  This plan is based on questionnaires and interviews about personal and financial circumstances.  These circumstances include household income, expenses, assets, investments, and debts; tax returns; insurance coverages; retirement programs; and estate plans.  Other important information includes personal and family expectations, motivations, risk tolerances, and objectives.

With this information, a planner helps the client define and prioritize personal financial goals in general areas–for example, capital accumulation for specific goals such as buying a home, children’s education, reducing taxes, protecting against personal risk using insurance, managing investments, and maximizing the estate left to heirs.

Special Planning Concerns

Throughout one’s life, he or she will face changes in his or her personal circumstances that call for special attention during the personal financial planning process.  Changing job status, relocation to a new state, getting married, having children, losing a spouse through divorce or death, retirement, taking responsibility for dependent parents — these and other stressful events are “financial shocks” that require reevaluation of one’s financial goals and plans.

However, one should avoid making major financial decisions at such times, when he or she is vulnerable.  It is important to postpone any action until one has had time to recover from the event and evaluate all one’s options carefully.