Budgeting is not instinctive for most of us. The word itself can induce all kinds of emotions including nausea. Budgets restrict. Budgets prevent. It’s not in the budget. Do you like hearing those words? Contrary to many beliefs, however, budgeting is a great way to keep control of your finances and keep you on financial track. It can be liberating. If you haven’t done so already, try to think of budgeting in a new light. Why do you think every major company has a budget? One of our goals is for you to start thinking about your money as a business does. You’ve worked hard for it, so you don’t want to waste it. You can instill the budgeting business sense early by using this teachable moment.
What goes into planning a birthday party?
c) Food and Drinks
d) Party Favors
Steps to make this moment teachable:
1) How much do you want to spend in total dollars? Have your child help you decide how much you want to spend for the total cost of the party. For example, you may decide that you want to spend $100 on the party. This might mean that you have to plan to bake the cake, make some of the decorations yourself, etc. Discuss with your child what you can do yourself to save money, how many people you can invite based on the budget, and what you’d like to buy. Also, look around your house first. You might have some items that would be perfect for the party that will not cost any additional money, since you’ve already purchased it. That’s called a sunk cost, since the money is already spent, you might as well use it.
2) How much do you want to spend by category? Once you’ve figured out what you need to buy and how much you can spend in total, work out a budget for each category (example list above). Decide how much you want to spend per category that comes up to the $100 total. This may require making a more detailed list depending on how many people have accepted your invitation. This is why we always include and RSVP some time before the party in order to be able to shop around the final invitation list. Mention that letting people know if you are coming to the party is a polite way to help a person plan accurately.
A list of possible categories is shown below:
3) Go shopping around the budget but be flexible enough to revise. Decide to stay within the budget by category or decide to allocate more or less to one category or another if you’re expectations change as you shop. Do your best to stay within the overall budget (ex. $100), however.
4) Keep your receipts and label them by category, so you don’t forget. Consider writing them in a notebook or get fancy and put them in a spreadsheet.
5) After the party, compare your actual spending to the budget. A budget is useless if you do not check whether you’ve actually stayed within the budget. Flexibility may mean that you’ve gone over or under within certain categories. The overall should be within the budget. Checking by category is still useful if you plan to make the budget again. You’ll know whether you need to spend more or less this time than you had expected the last time.
This exercise is a great way to teach a child the first steps of budgeting.
You can do the same with Christmas shopping. Create a Christmas gift list by name (use the names instead of the categories above), decide how much you will spend per person, go shopping, stay within the overall total but be open to some flexibility, and check whether you’ve accomplished staying within the budget.