Managing a family budget can be challenging, but with a written plan, it becomes management and rewarding. Here are a few tips that will help you create and maintain a family budget that works for everyone.
Assess Your Current Financial Situation
Before creating a budget, you need to have written down the details of how much money you make and how much your household is spending.
- Track Your Spending: Record all your expenses for a month. Include everything, such as, your fixed expenses. Fixed expenses are things that are the same each month. This could be rent, mortgage, a car note, and recurring billing like streaming services. You will also need to included monthly expenses that may fluctuate and can be considered as variable expenses. Variable expenses include groceries, gas, and entertainment.
- Note All Income Sources: With today’s economy, it is common to have the need for multiple income sources that include side hustles or multiple jobs. It is important to list all income you receive to know what your true budget can and will be. Income sources can include salaries, bonuses, disability payments, or passive income streams.
- Analyze Debts and Figure out Savings: Record all of your outstanding debts and determine how much you want to put away towards savings, retirement, stocks, and/or an emergency fund. This will help you determine your current financial situation and decide if a change in spending is needed.
Plan Out Your Financial Goals
Whether your plan is to maintain the lifestyle you are living or begin including a change, like a new car or an annual vacation, you will want to start with a plan. With your written out income and spending assessment, you can now create your budget.
- Categorize Expenses: Split up your expenses in detailed and specified categories so you know exactly where your money is going. For debts, such as credit cards, writing down the exact name of the credit card can help you determine what card to tackle first with any excess income. Be sure to have categories like healthcare, education, and even take out food.
- Distribute Funds: Note the exact amount of your monthly income to each category. If you are are the type of person to add extra towards minimum monthly amounts required by the credit card company, note the usual amount you would put towards that card.
Make Use of Budgeting Tools
Choose a budgeting tool and/or app that fits your need.
- Spreadsheets like excel and google sheets are great tools when creating and monitoring your budget. Although, spreadsheets may be a bit old school or outdated for some.
- Budgeting apps that have been created specifically for managing your budget are options to look into. Honeydue and Empower are both free budgeting tools that can also be downloaded to your phone or computer to better manage your budget.
- Digital Planners for budgeting can also be used to manage your monthly spending, income, and saving goals.
Include Your Family
Teaching your children how to create and manage a budget is a great opportunity to prepare them for the future. Financial literacy does not start in the traditional school system and should be taught early on to promote healthy spending.
- Family Discussions: Having regular discussions about the monthly budget will open the doors for questions and promote understanding. It is common for children to not understand the amount of money that goes out on fixed expenses. The best way to prevent the cycle of financial illiteracy is to be open to discussion and teaching the importance of a budget.
- Include Them in Planning: Include your family in the planning of spending on variable expenses such as entertainment and savings. With a shared goal, you will be able to have the open conversation if spending increases unexpectedly. Be open and understanding that emergencies and unforeseen things happen. With open communication, you can make changes accordingly.
- Motivate: Create a reward system to help your family stay on track with saving and budgeting goals that have been set. Plan a special outing as a result of meeting your family’s monthly goal.
Make Changes When Needed
A budget can change on any given day. It is important to revisit your budget plan when an unexpected event occurs and make changes where needed.
- Review Monthly: Each month there should be a review of your budget and measure the difficulty or ease of staying on track. Making adjustments should occur where necessary.
- Adding Additional Categories: Adding categories that may be more specific of your expenses is an option to track spending better. From lunch money to extra food to meal prep, adding money to those smaller categories can help you manage those expenses better.
- Create an Emergency Fund: Create a category for an emergency fund so that it can be used instead of using the money within your budget plan.
Cutting Costs
The results of creating a physical budget plan you can view and manage is learning where you can cut costs to increase savings and/or investments.
- Entertainment and Activities: Look for low cost activities or free community events, parks, museums, and libraries as a family outing option. With the many affordable streaming options and their free trials, consider signing up for free trials for a few months at a time to help increase savings.
- Shopping for Personal Items: Shopping during seasonal sales will allow you to maximize on your clothing purchases during the year. Consider shopping at thrift stores, online market places, and even check out garage sales for deals.
Include Saving and Investing
Saving and investing should be included in your budget plan.
- Retirement Funding: If your employer offers 401k or an IRA, it is a good idea to opt for automatic withdrawal from your paycheck. Using an automatic transfer option will keep you on track on building your retirement fund account
- Education Savings: 529 plans or other education savings accounts will help your kids start their college education with little to no debt on their journey as an adult.
A family budget is the best way to stay involved and open about your monthly spending. With open communication and active involvement from your family’s contribution, you can achieve financial stability and peace of mind. Consistency is key and making adjustments as needed will create the financial freedom you are looking to achieve and/or maintain in the future.