The purpose of this article is to inform the importance of creating a family budget as early as possible.
Planning a family budget will keep you from living paycheck to paycheck. Constantly crunching numbers to figure out what will be spent where is not exactly how you want to spend your time.
This article will cover:
- The right mindset to start budgeting
- Why is it important to have a family budget?
- How to make a family budget.
- Budgeting tips for family.
- The best ways to track the family budget.
The Right Mindset for Budgeting
Budgeting has gotten a bad reputation. Many people think that a budget will hold them back and keep them from spending their money on what they want. But that’s not the mindset you want to have to start your financial journey.
Budgeting is about spending with a purpose.
Before you start your family budgeting, it’s wise to have a ‘future’ talk with your family to guide and nurture their mindset.
Why Is Budgeting for Family Important?
Because your life and your family’s lives are not just about today, this month, or next month.
Creating a family budget is about taking control of your family finances, feel secure, and have less stress. You will have better financial awareness and avoid accidental overspending and debt.
Budgeting for a family will not only prepare you for the future, but it will also create good financial habits. It will help you teach your children the importance of money management as well. They will grow up with an understanding of the value of money.
Family Budget Process
Who should be responsible for starting the family budgeting process?
Ideally, it should involve everyone in the family or a mutual agreement between spouses. Your family will be better off financially when you and your spouse share the same vision.
When is the best time to start creating a budget for the family?
Theoretically, you should start building your budget before you even get married. You and your future spouse should talk about each other’s financial situation, align the financial priorities and debt, and develop a plan to compromise spending.
Practically, if you don’t have a family budget yet, you should start today.
How To Make a Family Budget
A family budget starts with combining both spouses’ income and distributing it evenly, starting with the highest priority expenses, then other future expenses. While family budgeting is more complex than managing personal budgets, the goal should be the same: to manage family expenses wisely, avoid debt, and plan for the future.
Find Inspiration with a Free Family Budget Planner
If you don’t know where to start a family budget planning, there are several free family budget plans available online that you can print out and fill in to fit your situation.
There are also various budgeting apps that you can download and connect to other family members. A budgeting app allows you to keep up with everyone’s expenses and spending without having to write it all down.
Well-Known Budgeting Methods
You can follow different methods to stick to a family budget, such as the classic cash envelope system, the zero-based budget, and the 50/30/20 system.
You might recognize this type of budgeting from your parents. It is as classic as splitting the income up by bills and everyday expenses. You pay your bills first, then take your leftover money and divide it up for every day and extra costs. You can use actual envelopes with cash, or you can do this virtually.
The idea behind the zero-based budget is that every dollar should have somewhere to go. The plan is for your income minus your expenses and savings to always amount to zero.
You and your spouse should combine both incomes and split it 50/30/20. 50 percent of your income going to your family needs, 30 percent going to the family wants, and 20 percent going toward savings and paying off debts.
Preparing a Family Budget for a Month
Planning a monthly family budget may seem overwhelming and time-consuming at first, but it will help you get on track with managing your money. As you continue to budget monthly, the task won’t seem as extensive.
Save up and plan to have the entire family budget for a month. On the day you receive your paycheck, budget out your resources accordingly, and monitor your spending for the month’s remainder.
Once you get in the routine of planning out your budget with whatever family budget planner you decide to use, try to get a month ahead.
Compile All of Your Income
The first step of the budget breakdown is to total up your income and your spouse’s income from all resources. It includes salaries, freelance work, stocks, tips, and any miscellaneous income, even if your income varies from month to month.
This method will help give you an idea of your family’s average monthly income and what can be spent.
If your income does fluctuate monthly, it is best to go back six months and get an average of six months’ worth of income, to give you a realistic idea of how much you have to spend.
Start with Family Expenses
After you have an idea of what your monthly income looks like, the next step in creating a family budget is to make a list of your regular family expenses. Start with fixed costs like:
- Mortgage or Rent
- Utility Bills like Water and Electricity
- Transportation Costs like Gas or Transportation Pass
- Childcare and other child needs
- Education Costs
Then you can move on to other types of payment and debts such as:
- Automobile Payments
- Credit Card
- Other loans
When considering purchasing an item you want but is not necessary, you can follow the 30-day rule. It will help prevent impulse buying.
If you have an item that you wish to have, don’t buy it immediately. Instead, go home, write down all the details about the item and then put that list somewhere where you can easily be reminded and consider every day for 30 days. If you still want the item after thinking about it for 30 days, then go ahead and buy it. Otherwise, leave it and move on.
Save for Emergencies and Sinking Funds
Once you pay off the necessities and your debts, save any leftover money for emergencies and sinking funds.
It is ideal to have at least six months to twelve months of monthly expenses in your emergency saving. Being prepared with an emergency fund gives you confidence that you can handle any of life’s unexpected events without financial stress.
Once you’ve hit a reasonable threshold of emergency savings, you can start saving for a sinking fund. It’s a way to create a family budget for family vacations, birthday parties, holiday celebrations, and any other important family expenses. To keep staying organized, you can create and label sub-accounts for your financial goal.
Track Your Family Budget Journey
It is probably wise to check your finances and monitor what you spend every day at the beginning of your journey. Sometimes, you will also need to make priorities and decide what is most important. Don’t forget to communicate everything with your spouse and be prepared to be flexible.
The best way to keep up with this is to have a written record of your monthly budget or use a family budget planner or budgeting app.
Make Adjustments & Stay Consistent
It’s ok to make several adjustments when creating your family budget, especially during the first three to six months.
After a few months, you will find a flow. You will begin developing mindful spending habits while also educating your other family members to be financially responsible.
After a year, review your budgeting method and family expenses again. See how much debt you have paid off and how much you have set aside in savings. Seeing your progress will help you stay motivated to remain on track and keep hitting those goals.
Conclusion of Budgeting Tips for Family
In conclusion, creating a family budget is a way to secure a sound financial future for you and your family. Paying for your family’s needs, eliminating debts, avoiding unnecessary spending, and building up savings for emergencies will help eliminate financial stress and give you peace of mind.
- Start by talking with your spouse and making sure that you both are on the same page financially.
- Then, identify your financial goals, both short and long term.
- Write down the monthly budget breakdown
- Finally, come up with a monthly family budget that works best for your family.
In the long run, you’ll see that a monthly family budget gives you financial freedom rather than limits it.