One of the smartest things you can do when you have a family is budget your money. Finances are often a major cause of stress within marriage for 35% of couples according to Sun Trust Bank. Sure, when money is tight, it can be a massive struggle. But if you and your family plan your finances, you could resolve issues before they even materialize!
When you plan your expenses, you can gain better control over your finances. Then maybe daily life with kids won’t be as chaotic. You can plan for things like family vacations and purchasing a larger car. If you need help on planning your family’s money, keep reading. Here are five tips on budgeting with a family:
Communicate. Every good marriage begins with communication, and this is especially true when it comes to finances. Do you ever feel like your significant other doesn’t understand your purchases? You’re not frivolous with spending money, but you do want to have fun sometimes and not have to consult with him or her about every dime you spend.
Start by discussing your goals and then work towards a compromise. Discuss your must-haves with your partner, but you should be willing to give something up if the numbers don’t add up well. Your honesty and communication will lead to trust, a better relationship, and more freedom!
Cut Expenses to Save Money. If you’re looking to making your budget for the first time or you want to improve your budget, you are probably trying to save money.
One of the best ways to save money is by cutting expenses. To figure out what to cut, you’ll first want to distinguish between fixed and variable expenses.
Fixed expenses like a car or a house tend to be harder to cut, but not impossible if you’re willing to spend time on making a few phone calls and diving in deeper. If that doesn’t make sense, then let me explain. Refinancing a car or house is a way to cut fixed expenses, and it could help you reduce expenses. Or maybe you can cancel a subscription or two, like an audiobook club or an unused gym membership.
Once you cut away as many fixed expenses as possible, work on the variables. Variable costs are usually pay-by-usage services, like food and heat. Your family can work on lowering these types of expenses.
Discuss changes you can make with the kids, like turning the lights off when not in use or turning off the faucet while brushing teeth.
Planning meals and buying food to cook at home is an excellent way to save money. Try giving each child a special night to prepare food for the family. This might come in handy if you’re tired or late coming in from work.
Every dollar counts, so try to nip away at expenses and add them to your savings.
Set up an Emergency Fund. Having an emergency fund could mean the difference between barely surviving and thriving.
Ultimately, your emergency fund should be 3-6 months of your monthly expenses, but it’s easier to start with a small, attainable goal of $1000.
If you haven’t done so already, add a savings row to your list of expenses and decide what you will contribute as a family.
Once you save $1000 and put it toward your emergency fund, begin repaying debt by using one of the debt management methods in Tip 4.
Use a Debt Repayment Plan There are two useful ways to pay off debt. The first way is called the Debt Snowball Method. This is a good method to use if you need motivation along the way. It involves making a list of your debts from lowest to highest and paying the lowest off first. Once you pay the first debt, apply the payment amount you used for that debt to debt number two. Be sure to make minimum monthly payments on all other debt and keep following this plan until you reach the bottom of the list.
The second debt repayment plan is for people who would prefer to focus on paying down high-interest debt. It’s called the Debt Avalanche Method.
With this plan, you make a list of your debts too, but this time you place your highest interest debts at the top of the page. Then you pay off the debt in the order of highest interest first. When you pay off the first debt on this list, apply that payment to the second debt on the list.
When choosing a debt repayment plan, select a plan you are more likely to stick with. While the Debt Avalanche plan will save you money on interest, the Debt Snowball may be more gratifying if you thrive with small wins.
Track and Improve. A good way to track your budget is to follow what happened during your budgeted month. Did it go as well as you’d planned?
If it didn’t, don’t beat yourself up about it. Just make improvements and set goals with family members for the following month.
There are plenty of useful apps that track spending. Dollarbird uses a shareable calendar to track expenses. Using an app on each of your phones could be an excellent way to monitor and collaborate. Forbes Magazine has a useful list of 12 free apps that track spending.
Budgeting is an excellent way to get your family’s finances on track. Using these tips will help you control your money and pave a better tomorrow for your kids.
Have you created a budget for your family? Do you have any helpful tips to add to the list?