Build a Better Family Budget
Using the word “budget” can cause many emotions. Some think, “Yes! We need a budget so my child will stop spending so much money.” Others may think, “The point of having money is to spend it, right?” And you may be somewhere in the middle. But the best way to think of a budget is also the simplest: it’s a view of how much money you bring in designated toward your expenses during the same time.
Many Americans don’t always pay close attention to their finances. They get their paycheck and move the money as needed – paying bills, trying to save, paying off debt when possible, and spending money on themselves and others. Without a plan, it becomes an endless cycle.
Getting control of your family budget each month should be a part of planning for your financial future. Knowing where your money goes each month, and how much you have left, can give you peace of mind because you’ll have a plan for the short term and set yourself up for long-term success, too.
Building a better family budget takes time and patience, but it is worth it to keep control of your finances. The last thing you want to do is assume that things will work out and not pay attention to the money coming into and out of your home.
Follow these tips to build a better budget for your family.
Set Time to Discuss Your Family Budget
Being intentional about your money doesn’t happen by accident; to ensure you’re set up to succeed and save, communication with your family is important. Call a family meeting or designate time to sit with your spouse to talk about finances. It may take 30 minutes or a week, but making the time to establish a budget and get spending decision makers on board will be well worth your efforts! Because at the end of your planning session, you can breathe a sigh of relief knowing financial plans and goals for your family’s financial future are in place.
When setting up your family’s budget, you need to understand your current state. Don’t start changing anything yet – just list your incoming money and all your expenses. Don’t forget things like year-end bonuses from work or bills for student loans and other debts. It’s extremely important to take a look at everything now so that you can begin to plan for the future.
To correctly factor your budget, it’s key to take a realistic, honest approach. For example, you know certain expenses, like your rent or mortgage, will stay consistent. But expenses like groceries or utilities often change from month to month. When listing these less stable expenses, don’t underestimate them. Instead, look at previous bills or statements and consider upcoming events, holidays, changes in season, or additional factors that could impact the way you spend in a given time period.
Your family budget should have goals. Discuss your plans for short term and long term goals for your family. These can include everything from planning a summer vacation to buying a house to saving for retirement. What matters is that you identify your goals so that you can work toward them. Your goals will help motivate you to stick to the “savings” part of your budget. Without them, you may end up spending a work bonus on a new TV instead of saving it for a beach trip with your family.
Categorize Your Budget
Once you know your current budget and your financial goals, it’s time to make a plan. Start by putting your expenses into categories so you can see where the majority of your money is going. For example, a “Home” category could include your mortgage or rent, utilities, cable/TV and other expenses associated with your residence.
You can have as many categories as you like. Some to think about are:
- Monthly Expenses – These are necessary expenses that may fluctuate like groceries, gas, or religious tithes, and recurring costs like subscriptions to Amazon Prime or your home internet bill.
- Kids – You may want to break out tuition, sports, daycare and other child-related expenses.
- Recurring Debt – This includes student loans and unpaid credit card balances that you pay off over time.
- Savings – If you haven’t added money to this category before, it may be difficult to start, but it should include both long-term and short-term savings.
- Miscellaneous – This can include things like entertainment or shopping. This category is important to get a handle on as it may change the most and can be the easiest to lose track of.
- Retirement – This category may take many forms, including an IRA, a Pension, or a 401K, but it’s important to review and evaluate this section regularly to ensure your plan is still on track.
Identify Areas to Cut Back
The obvious place to find money to shift toward your goal is in Miscellaneous. Look at this category and identify places where you can cut back, such as shopping, entertainment or dining out. But rather than thinking of it as cutting back, start thinking about the goal you’re trying to reach to help you shift your perspective. “Is this shopping spree better than getting a step closer to booking my family’s dream vacation?” You’ll find that simply shifting your viewpoint can make cut backs easier to justify and help you save even more!
Once you’ve looked at all your expenses together, you may be surprised at what you find. For example, it’s easy to pay a cable bill when it comes in each month. But when you see how much of your budget it takes, you may reconsider the expensive movie channels.
Prioritize Debt Reduction but Continue to Save
Pay attention to your high interest debt, like credit cards. High interest debt can be one of the biggest drains on a family budget. Often, by paying this debt off sooner or by moving it to a lower interest card, you will pay less in the long run. That means saving money!
But while paying off debt is a priority, finding ways to save should remain just as important to you. Whether you are contributing to your retirement or creating an emergency fund, keep “Savings” as a line item in your family budget.
Use Budgeting Tools
There are plenty of websites and interactive tools that exist to help build and manage your family budget. Find one that works for you, and use it to help you stay on track.
So, You Built Your Family Budget – Now What?
Keep it going! Building your budget is the beginning of a long and hopefully prosperous financial future. Don’t waste your hard work by diverting from your plan! Instead, continue to evaluate your expenses and your income, and regularly update your approach to saving based on changes in your family and finances. Dedication to a long-term goal will require continued effort, but the rewards will be well worth it.
Check out these helpful tools and videos for even more ideas for planning your family budget.