Financial planning: Family budget

You'll need to add up what the family will require to make it through. You have to examine the saving and spending habits of your family to do this. The best way to understand your family's personal cash flow needs is to create a budget.

If you already have a budget, look back over the past year's expenses. If you don't have one, try to recreate what the family spent last year, at least in the major categories like loan payments, food, utilities and entertainment. Since many of the expenses are variable, identify which can be cut back, and which can be cut out.

Remember, too, that at least one partner's income will change, maybe for the worse, for the first few years of business startup and growth, so you will have to write your new budget to reflect the loss of income, or change in income. If the budding entrepreneur is the sole breadwinner, you'll have to plan on a larger loss of income.

Put at least one-fourth of the family's annual expenses in a bank account before you open your business. Financial planners always recommend an additional three-month liquid emergency fund, such as a money market account or short-term certificate of deposit. You may want to increase that to six months to cover the family during startup Use these figures to create a one- to three-year family survival plan in case the business does not generate the expected revenues.