Our experience with hundreds of families has conclusively demonstrated that in homes that run according to a budget, money is less of an issue than in homes where spending limits are only loosely defined.
This should come as no surprise, really. It is axiomatic that structure creates freedom.
For example, in a home where there are no rules or limits, are children happier? In a lawless society, is there less interpersonal conflict? Of course not. Both children and adults crave the security of knowing exactly what is acceptable and what is not.
The need for clear limits applies to money matters just as it applies to all areas of life. In a home where budgetary limitations are not clearly defined, there is more room for disagreement and squabbles over how money is to be spent. When reasonable, predetermined spending limits are in place, however, people can spend money without fear of a backlash from their loved ones — or from the bank.
Yes, there is definitely a measure of discipline and self-control involved in living within a budget. But it is far healthier for spending restrictions to be imposed by an impartial, unemotional budget than by a husband, wife or parent. With a budget in place, there should be no financial power struggles. Instead of husband, wife or parent having to say “no,” the budget becomes the authority that decides whether money is to be spent or not.
Consider the following scenario:
One day Mr. Cohen decides he needs a new car. Mrs. Cohen thinks the old one is just fine and that they cannot afford a new one right now. If the Cohens have a budget, the decision of whether to purchase a new car can be made objectively, based on the available budgetary allotment for vehicular and transportation expenses. The issue of “Can we afford it?” should be an easy one to resolve, since the family’s financial balance sheet will clearly indicate if money is available for this purpose.
If the Cohens do not have a budget, the decision might, and probably will, be made based on emotion: How badly does Mr. Cohen want the new car? And how insistent will Mrs. Cohen be that the children’s tuition or her new sheitel come before the new car?
When husband and wife (and possibly children, if they are old enough) decide ahead of time where they want their money to go, they are, in effect, eliminating possible sources of friction down the line. Once a year, or once every few months, when they readjust their budget, they can discuss how they want to spend their money. The rest of the time, money should be a non-issue.
A home is in many ways similar to a small business. At Mesila, we advise businesses to view their finances as a cake. The last, and most important, piece of cake is the profits. Suppliers, employees, landlords, the government and others are all eager to get their hands on the cake before business owners can “eat” the profits. Unless business owners carefully plan for that last piece of cake, the cake will disappear quickly, and they will be left holding an empty tray.
The family finances cake also needs to be apportioned carefully so that it does not disappear. A smart parent knows better than to cut big pieces of cake for a few of the children and leave nothing for the rest — he or she will divide the cake in a way that ensures that there will be enough for everyone. When one child begs for more than her
share, the smart parent will be able to say “no” firmly but lovingly, rather than give in shortsightedly and leave another child with only a tiny sliver.
Similarly, the only way to divide the family’s income cake fairly and effectively is to do so ahead of time, setting aside money for basic expenses while allocating reasonable amounts for the needs of individual family members and the family as a whole.
The smart parent will also make sure to leave a bit of cake over at the end. In the family budget, these are the “profits,” which might go to a savings plan or be used for something special — a family vacation, for instance.
Of course, for a budget to contribute to harmony in the home, it has to be realistic and somewhat flexible. If unbudgeted-for expenses continually arise, or if routine expenses consistently exceed their budgeted allotment, these are indications that the budget is too austere and needs to be reworked. A good budget is one that generously covers all essentials, leaves some room for non-essentials, makes provisions for unanticipated expenses and incorporates savings in some form.
This type of budget creates financial structure, takes the home’s focus off money issues and contributes to an environment in which healthy family relationships can flourish.