07/23/2012 05:09 pm ET | Updated Sep 22, 2012

The Budgetless Family: Formulating a Financial Plan

Have you ever gone on vacation for a week with your entire family? I am a husband and a father of three, and my family and I recently returned from our typical summer vacation. In preparation for our trip, we had to pack, buy groceries and travel supplies, arrange for our mail pickup, and the list goes on and on.

In addition, my wife and I had to plan our finances for the vacation, including what we were going to spend on eating out, activities, gas, etc. There was a tremendous amount of preparation that had to take place in order for everything to turn out well. I am sure this type of planning is what a majority of Americans go through each summer when they go on that all-important family vacation in order for the family fun time to be a success.

But imagine if we put the same amount of work in to our normal every day financial spending plan, or should I say the dreaded word, our budget.

According to the 2012 Consumer Financial Literacy Survey prepared by Harris Interactive, Inc., Public Relations Research for the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association, only 43 percent of adults surveyed say they have a budget and keep close track of their daily expenditures. In contrast, 56 percent confess they don't even have a personal spending plan. Either way you look at it, over half of Americans do not operate or even have a budget.

We plan our family vacations, extracurricular time and workdays down to the last detail, but one of the most important aspects of our daily lives, our money, over half of our country has no plan for! At first this seemed quite surprising to me, but after further thought I convinced myself that I should have expected that. Our government has been running without a formal budget or spending plan for a few years now, why should we expect those it governs to not follow its example?

If you are one of the 56 percent without a spending plan for your household, I challenge you to sit down and formalize a plan for your money. If you don't tell it where to go, I have found that it will still go, just in the wrong direction. At some point a river heading towards a cliff will flow to the top of the waterfall and plummet to the base below. The only way to stop that water is to create a plan for diverting it. I see those without a budget the same as that water rushing for the waterfall. If you don't divert your finances, they will plummet to a place where you don't want them to go.

So, for those 56 percent, I want to provide you with a couple of tips to steer those dollars in the right direction.

Formalize a basic spending plan

Everybody has to start somewhere. Begin by getting in front of your computer or a get pen and piece of paper to write on. My guess is that you know your average regular expenses, you just have never written them down. Jot down your normal monthly take home pay and subtract your normal monthly expenses (i.e. mortgage, car, food, utilities, insurance, etc.) You may be surprised to learn what your monthly surplus or deficit should be when everything is tallied up.

Don't underestimate the hidden expenses

Many people know their regular expenses, it's the irregular ones that sneak up on you and make the biggest hit to your checking account. Don't underestimate things like clothing expenses, groceries and eating out. Many people don't realize how much of their finances fall into one of those three black holes, never to return.

Track your progress

As the CFO of my company, our organizational budget would be worthless to me if we didn't compare our actual figures to it on a recurring basis. You should take that same approach when managing your own personal budget. Be sure to track your actual expenses against your spending plan each month. You can do this by utilizing a spreadsheet or simple personal finance software available at most major department stores. It's important to benchmark your initial plans (what you thought you would spend) with what you or your family is actually spending. This is the part where most people either have a heart attack or a major breakthrough.

Make adjustments to your budget and your spending habits

Now that you know what your budget is compared to what you are actually spending, it's time to take action. First, don't be afraid to adjust your budgeted figures. This part of the process may take a few months until you really know what you need to be spending. Remember, a budget doesn't work if it is not realistic. Fifty dollars per week will not feed a family of five, no matter what your budget says. Trust me, I tried this. Also, believe it or not, children grow. I know, I know. This shocked me as well. So be sure to budget items such as clothing for kids who outgrow their clothing faster than you can keep up with the laundry. We often forget about these types of irregular things until we see our son walking around with Euro-style capris that he wore as pants last Easter.

Second, make changes to your lifestyle and spending habits to bring them more in line with your budget. A budget is meant to be followed. You may get some to the left or right, but you need to stay as close to the agreed upon baseline plan as possible. This may mean you have to tell yourself or other family members no from time to time, but this is part of being a financially responsible adult. We definitely need more of these in our country.

By following these four basic tips to budgeting, you will be well on your way to being a financially healthier and happy household. Be sure to include the rest of your household in on your new plans. Financial planning takes effort from everyone. A budget will not work if you don't work together and communicate what is expected of everyone involved. Don't be shocked when someone overspends if they never knew there was a limit. It may be rough at first, but don't give up. You will be glad that you didn't.