Drawing up a realistic budget is a family project

Your Money

September 04, 2005|By KNIGHT RIDDER/TRIBUNE

Creating a budget that really works requires input from your whole family. Begin by having a family meeting with your spouse and children.

Hand paper and pencil to everyone. Agree that each should write down personal financial goals.

Be as precise as possible. Don't just note that you want to buy a new auto in five years; describe the make, and check car ads or call a dealer to learn the price.

After you've recorded all your key goals, divide them into three categories: short-term (those you want to reach within the next year), medium-term (those you want to hit within a decade or so), and long-term (those you hope to accomplish by the time you reach retirement age).

To help stimulate your thinking, here are some typical goals of middle-income Americans, depending on their life stages:

Short-term: Building an emergency fund; buy a modest car or a first home; prepare for having a child.

Medium-term: Trade up to a bigger house; remodel or improve the present home; buy a vacation home; pay for college.

Long-term: Take an unpaid leave from work; start a business; plan for children's weddings; help children meet goals such as buying a first home; live comfortably in retirement.

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