A family budget is an important tool for ensuring that your spending doesn’t exceed your earning and that you are able to put something away for an emergency. Creating a budget can be a bit overwhelming and you may have to do some trial and error to find a solution that works for you. Here are some tips to keep in mind.
Have a Goal
Perhaps your goal is being debt free or saving for a big family vacation. Whatever it is, having a budget goal gives you more motivation to stay on track. Make sure everyone in the family knows what the goal is and work toward a budget together that will set you on the path to achieving it.
Separate Fixed and Discretionary Spending
Fixed spending includes money you have to spend, such as on food, your rent or mortgage, and utilities. Discretionary spending is the money you spend when you decide to stop for a coffee or hit the drive thru with the kids. Separating this money makes it easier to be sure you don’t come up short at the end of the month. Use Habito’s mortgage advice to help you balance everything.
Create Discretionary Subcategories
When you have discretionary money, make sure you divide it into subcategories so that it all goes to the appropriate outlets. This might be dining out or going to the movies, but it’s also a good idea to include saving for your goal here so that money for your end goal doesn’t get mistakenly spent on something else.
Pay Off Debt
Somewhere in your family budget there should be a line item for paying off debt. Allocate a certain amount of your income to paying down medical, credit card, or school loan debt. Whittling away at that debt eventually frees up funds you can use elsewhere. Getting out of debt gives you more financial freedom down the road.
When Paying in Person, Pay in Cash
Subconsciously it’s harder to part with cash than it is to cash a check or swipe your credit card. It makes sense therefore, to only carry cash when you shop in person. Not only does this prevent you from spending more than you allocated for the shopping trip, but it also makes you think twice about making a purchase when you have to hand over cash before you leave the store.
Anticipate Your Expenses
The best way to manage a family budget is to update it every month. That way you can plan for expenses you don’t see all the time, such as renewing the registration on your car or buying school supplies. Some things stay the same month to month but making arrangements for those that don’t can save you from running out of money before everything is paid.
Billing Cycles Can Be Changed
If you find that current due dates aren’t meshing with your budget and paycheck schedule, call the provider and ask for a change. This is a simple step that can save you a lot of money in overdue fees and ensure that everything is being paid on time to keep your credit score from dropping.