Managing your family’s money goes beyond dropping any spare change into the piggy bank.
Parents or spouses need to meet all of the family’s expenses and set money aside for emergencies while saving for the future.
By setting up a budget, you’ll be well on your way to track your money and make sure you’re spending it wisely.
Read on to discover how to set up a family budget and some tips to help you save for your dream house, your kids’ college, or your eventual retirement.
Setting Up Your Budget
Suppose you haven’t set a budget yet. In that case, here are three easy steps to get you started:
Step 1: List Your Income
List all the money that you expect to earn for the next month. That includes your paycheck(s) and additional income from a side hustle, freelance work, or a yard sale.
Sometimes, your income might be unpredictable, depending on your work. If that’s the case, jot down the lowest estimate of your expected income (you can always change it later).
Step 2: List the Family Expenses
Next, you must plan for all the money going out in the month. Start with the four main categories:
● Shelter (rent or mortgage repayments)
● Utilities
● Transportation (car repayments or fuel)
● Food
Step 3: Deduct the Expenses from Your Income
Finally, you need to subtract your expenses from your income. If the answer is zero, that means each cent of your income is being spent.
If there is a surplus, you have extra money you can set aside for emergencies or saving for the future. If the balance is negative, don’t despair. A budget will show you where to cut back on your spending. For example, you could cut back on grocery costs or personal expenses.
Tips for Creating a Sustainable Family Budget
Now that you know the basics of budgeting, here is how you can create a sustainable budget that will help you save for the future:
Remain Flexible
It is highly unlikely that what you budgeted for the month ahead will be accurate to the dollar. It is essential to remain flexible, as expenses can change unexpectedly. Your kid may suddenly have to pay for a school outing, or your car may need repairs.
Don’t become frazzled when your budget needs to change. Instead, focus on remaining flexible.
Use Online Tools
Free online tools are available to help families budget and save money. Alternatively, you can go for a paid version for more features.
Mobile apps allow you to track your budget on the go. There are also online platforms where you can invest (even if you’re a beginner) and start building your savings.
Separate your Wants and Your Needs
For your budget to work, you should separate your needs (like food, utilities, and rent) and your wants (like chocolates, takeouts, and a new summer outfit).
You should always ensure you have enough money for your needs before considering your wants.
Communicate with the Kids
If you have kids, you must talk to them to help them understand that your money isn’t infinite. Explain how they might not be able to participate in every extra-curricular activity or buy the toys they want. Help them understand you’re saving money for a holiday, new car, home, or college fund.
Pay Off Debt
Once you know how much extra money you have after calculating your most basic expenses (the needs), you can allocate funds to start paying off debts. We recommend prioritizing the highest-interest debt first.
Monitor your Credit Score
Once you start repaying debts, you should notice an improvement in your credit score. With better credit scores, you will get better loan terms and lower interest rates, and you can apply for credit cards.
Using a reliable credit monitoring service is a vital part of financial planning. It allows you to track your progress and ensure your efforts in improving your credit score are effective.
Track Your Goals
Monitoring your budget is essential, but you should also track your financial goals. Regularly checking your progress helps you stay motivated.
For example, if you want to go on an out-of-state trip over the school holidays, you need to track how much money you’re saving that is going toward the vacation plans. This step will help you see how much money you still have to save and keep you excited to continue saving.
Wrapping Up
By taking control of your family budget, you’ve taken a significant step toward financial security. Remember that piggy bank? Now, imagine preceding that and building economic stability for your loved ones. With your new budgeting skills, your financial dreams can become a reality.
The key to success lies in flexibility. You can adjust your budget as needed, and your wants can wait while you prioritize your needs. Most importantly, track your progress and celebrate the financial milestones. Seeing your vacation fund grow or your college savings account take shape will keep you motivated.
