Setting up a family budget is imperative to successfully budgeting the families needs vs. wants. Setting up that family budget doesn’t have to be hard and we’ve got the tips to get you started.
How To Know If You Need a Family Budget
Do you really need a budget? Isn’t that just a boring list of numbers that means you never get to spend money on what you want?
A budget is really just a way to take control of your finances. It does not necessarily mean you can’t ever spend your money on what you want; it just means you spend your money smarter.
In fact, if you are always denying yourself and never buying anything you want for fear you can’t afford it, a budget could be liberating. Dealing with real numbers tends to be a lot less stressful than dealing with vague impressions of your income and expenses.
So how do you know if you need a family budget? Here are some tips to help you know if you need to form a budget.
- Your credit cards are never paid off.
If you are paying only the minimum balance on your credit card, and/or using one credit card to pay off another, then it’s time to work out a budget to get out of that hole.
- Money “burns a hole” in your pocket.
Do you feel like you have money for a moment or two, then it’s gone? This could mean you have too many expenses, or that you are too quick to spend on wants rather than needs.
- You don’t put any money into your savings, or you are random about how much and when you put money in.
Having a savings plan is an important aspect of financial management. If you don’t have any regimented plan for putting money into savings – say the first 10% of your net income always going to savings or all bonuses from your workplace going straight to savings – then your savings will tend to languish as you keep spending on things you want.
- You don’t have a savings account at all.
If you don’t have any savings or emergency fund, it may be a sign that you need a budget. A good family budget can help you make savings a priority.
- You’re always saying, “I can’t afford it.”
Do friends ask you to go out to lunch, or to an event, and you say you “can’t afford it” all the time? This may be true, or it may not be; forming a budget will help you know what you really can and can’t afford.
- You never seem to have enough.
Money can be deceptive – what seems like “plenty” can suddenly be not enough. Forming a budget can help you get a grip on what you really have; you may be pleasantly surprised that you do actually have enough, or that it’s feasible for you to make some strategic cuts so that you will have enough.
Keys to a Successful Family Budget
Creating a family budget is within everyone’s reach, but creating a successful one requires some particular methods. Here are some tips to help you create a successful family budget.
Get Everyone on Board
The more inclusive your budget is, the more likely it is to work well for your family. Include every family member who is old enough to understand. A budget affects everyone, and it’s a good idea to listen to input from other members of the family.
Leave Room for Luxuries
Some budgets are so tight that it may seem there’s no room for any luxury. But if you get a bit creative about what constitutes a luxury, you will probably find you can, in fact, afford some kind of privilege or luxury. It could be something like buying your favorite brand name item at the store instead of settling for the store brand, or maybe buying fresh fish instead of frozen once a month. Maybe ordering a pizza or Chinese food is a luxury for your family that you can include in your budget.
If you are budgeting with more money, your luxury could be a family vacation or a new piece of electronic equipment. The point is to include some kind of luxury in your budget. This helps keep family members motivated and makes the budget easier to deal with.
Get a Good Estimation
To do this, it’s a good idea to take your last three months’ worth of income and create an average. When in doubt, round down so that surprises will be more likely to be on the plus side. The same is true for expenses – include at least three months of expenses to get a true picture.
It takes a few months for a budget to sort itself out and become a habit. There will be bugs that need to be worked out. Understanding this can help you stick with it as it needs tweaking and adjusting.
For some, using software to lay out the family budget can be very helpful. Software that is designed for the purpose may make creating the budget easier.
As you look at the things that cost you money, remember gas and miles on your car. Combining errands is something most people try to do, but there might be some other combinations that you hadn’t thought of. For example, visit out-of-town family members during your vacation.
Distinguish between Optional and Necessary Spending
This distinction is harder to make for some people than others, and it’s tougher in some family dynamics than others. What one person thinks of as a “necessity” might be looked at as a luxury by someone else. If you’re in doubt, check budget formats and accepted principles in this regard that come from a third party.
Pay off Debts
It’s unpleasant, but paying off debts needs to be high on the priority list for your family budget. The sooner they’re paid off, the sooner you’ll have more money left over!
How To Create A Family Budget
You’ve probably heard that getting everyone involved is important to the success of your family budget. But you may be wondering if that’s really necessary, or how to even do it. Here are some ideas and tips for getting everyone on board with your family budget.
Sometimes parents try to hide their financial situation from their kids and/or each other. While this may seem like “sparing” the ones you love, in actuality, it can cause undue stress on the one family member who does know how bad things are, or how things work financially.
It’s true that you don’t want to overburden your kids with responsibilities that aren’t theirs, but including them in a frank discussion of your financial situation can go a long way toward easing your burden and garnering their willing participation.
The Family Meeting
Call a family meeting to discuss finances. If you’ve never done a family meeting before, this is a good place to start. It may not be everyone’s favorite topic, but it’s an important one.
Ultimately, your kids and spouse will be glad you included them in the discussion. Another tip on the meeting – try to call it at a time when it doesn’t cut into other plans. This should help reduce resentment.
It Affects Everyone
Explain how your family finances affect everyone in the household. Be clear and specific, citing fees, tuition, allowances, groceries, etc. and how they all cost money. There’s no need to beat everyone over the head with this information, so to speak; but it gets family members to think a bit about where the money comes from. It’s easy to take things for granted.
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If the budget involves cutting back, it’s probably a good idea to cut back in areas that affect the whole family rather than just one member. Otherwise, that one person may resent what seems to be preferential treatment of the others, and you’ve lost your whole-family approach to the budget.
Set Goals Together
As you work to formulate your budget, work on common goals. What would your youngest child like to see as part of the budget? She might say toys. Your oldest child might point to electronic devices as something to include; your spouse may say a nice vacation.
Consider everyone’s wishes and come up with some realistic, common goals. Not everything is doable, of course; but finding creative ways to get everyone’s needs met is what family life is all about.
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