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For a family to be secure and to have the capability to make progress and contribute to society, it is essential for the leaders of the family to have control of family finances. Control means, for the most part, that the family is aware of their financial priorities, income and out go. It also means that the family does not spend more than it brings in and that the spending that does take place is in alignment with the established financial priorities.

This may sound simple but the lack of awareness of these things is at the base of all of the financial difficulties faced by our country, state and city governments as well as a great deal of families today. A families financial priorities are usually based on a basic hierarchy of needs, namely food, shelter, and clothing. Once those needs are filled families usually look at expenditures that will enrich the life of the family. If these priorities have not been set, it is possible that the basic needs will not be met.

The first step is setting your financial priorities. All family should be involved with this process, because the priorities will have a direct effect on each family member’s life. Being involved in the priority setting process will also help them support the priorities once a decision has been made. One method that we used was to start out with a pile of coins that represented the money that the family brought in each month. We would then take out money for the mortgage payment, electricity, water, gas, food, etc. This would help the children visualize the process and understand that when the money was gone it was gone and we might have to do without some of the things we "want" to make sure that our "needs" are met.

The second step is to document what you are spending. This basically consists of categorizing your expenses and accounting for every check that you write and even the cash that you spend. I like to use a computer program such as Quicken for this purpose. After a year of diligently entering each check into Quicken we decided to do a report on our categories. It was quite revealing. One of our categories was "Eating Out", it was a shock for us to see how much money we had spent over that year on "Eating Out", this awareness enabled us to make a change, and this change greatly effected our monthly bottom line. Without keeping track, making that change would have been much more difficult.

The third step is to turn your priorities, and awareness into a plan or a "Budget". The biggest advantage of a budget is that it will give you control of your money. It let’s you decide what you are going to spend your money on. Your budget will definitely be affected by the commitments that you have already made, like your house or car payment, but it will let you apply what ever is left the way you and your family have decided.

We have just touched on some very basic concepts for family finance, which are three basic items:

1. Set your financial priorities.

2. Document expenditures.

3. Make a plan.

In future columns we will go into more detail on each of these items and we will talk about some methods to take control of your finances. We will also review books and software to help as well.