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What is Budget Counseling?

For most of us mortals not born into aristocratic or otherwise well-to-do families, perhaps the greatest and longest lasting challenge of our material lives is to assure for ourselves a decent measure of economic stability over our lifetimes. The chief tools and methods for assuring our prosperity are the income we earn and the wealth we accumulate during our working years by dint of our own industry and labors.
Income should not be confused with wealth. Many people earn well and accumulate no wealth, while others earn less, but with responsible and frugal management are able to build impressive wealth over the years. The accumulation of wealth over a lifetime of labor is what assures us of meeting all our needs and providing all our wants throughout the decades of our working and retirement careers.

I will reveal no great secret if I say that a large percentage of middle-income earners is next to clueless about how to create a home money management system that will ensure the building of wealth over a lifetime of earning. A couple earning an average net income of 18,000 NIS per month for 25 years will take home over that time a total of 5.4 million NIS in salaries, most of which , of course, will be spent on sustenance, shelter, education, health, recreation and other vital needs. In addition, they and their employers will be contributing monthly to pension and related funds to the tune of another million or so shekels (principle alone) over those 25 years. So our task as homemakers becomes one of taking the long view of how much we actually earn over a lifetime and then zooming in for a closer view of our monthly earnings and their potential for the accumulation of wealth, because for most of us, our income is the only source for creating such wealth.

Here is where family budget counseling can make a difference in a family’s money management. A comprehensive counseling program will address three financial challenges common to every family: month-to-month management, risk management and goal realization. Let’s look briefly at all three.

month-to-month management – requires the preparation of a monthly budget before the start of each month and requires weekly reviews of spending so as to stay on target throughout the month. Every shekel gets a name and a destination for the month. We allocate monies for our basic needs, and also for long term projects, such as savings, pension and life goals. People who do not budget are often unaware of where their money is going each month. Budgeting is an eye-opening exercise for the uninitiated, where much is learned about fixed and flexible expenses and about ourselves and our priorities as manifested through our spending habits.
risk management – requires assuring protection against financial catastrophe for ourselves and our loved ones. This includes life, health and disability insurances, among others, as well as pension planning.
goal realization – requires the delineation of family financial goals, a timetable for reaching them, and a savings plan for their implementation. I recall the couple with a 12-year-old son who declared to the budget counselor that the approaching bar-mitzvah kind of sprung up on them out of nowhere, as if they didn’t know at his birth that the big event would arrive one day. Life events can and should be planned for – smachot, higher education, weddings and vacations, just to name a few. An example would be a four-year tuition fund for a daughter’s ulpana education estimated at 40,000 NIS (10,000 NIS per year). Were we to establish a savings goal for this purpose at her birth, a monthly deposit of 200 NIS until her 14th birthday would yield about 43,000 NIS at a conservative interest rate of 3.5% per annum, and the four-year tuition would be covered with no extra burden on our monthly budget.

The budget counselor, more than anything else, is a teacher. He will teach a couple how to plan each month’s spending in accordance with their priorities, so as to achieve the maximum financial benefit from income. He will examine and explain the family’s insurance policies and recommend changes as might be necessary, and he will prepare with them a comprehensive program of financial targets and goals so that they can live prosperous and fulfilled lives. When you want a stable structure, you work from a blueprint. Budget counseling is the blueprint for a stable fiscal life based on responsible planning of limited resources.

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