5 Best Budgeting Strategies For A Family
If you believe it’s finally time to get your family’s finances in order once and for all, at First Financial Bank, we know exactly where to start.
It’s time to develop a family budget.
It’s a simple sentence, but that doesn’t mean it's always so simple to take action on—especially when you’ve got a family. People get busy, money somehow starts to seem tighter, and family conversations about money aren’t something that you may have ever done before. But remember, financial planning is part of taking good care of your family.
Here Are 5 Budgeting Strategies for a Family
1. Take Inventory of Your Expenses
Do you want to create a family budget but don’t know where to start? A good place to begin is to collect information. Collect all of your bills, paycheck stubs, bank statements, grocery receipts, and monthly subscriptions, and write them all down.
It can be helpful to create a spreadsheet that keeps track of all of the money coming in or going out of your household. This will show you exactly where you need to be cutting back, what you need to prioritize, and how can you be more frugal as a family.
You can’t properly manage your spending if you don’t know how much you’re spending on groceries, utilities, and going out to eat. Once you have access to all of this information, you can create a budget. Determine what areas of spending can be cut back or eliminated. If you have the intention of saving money but no plan, you will become frustrated and this will be inefficient.
A budget lays bare what steps you can take today to save more money instead of playing a guessing game or feeling guilty when you make a larger purchase. With a plan in place, you can account for certain expenses and fit them into your budget.
2. Develop SMART Goals
The trick to staying on track and holding yourself accountable when it comes to budgeting is to keep your goals specific and attainable. To make sure your budgeting goals are realistic, follow the SMART rule:
- Specific: Keep your goals simple and well-defined so they don’t become too confusing to track.
- Measurable: There should be specific criteria to measure any progress made towards achieving the goal so you know if you’re succeeding or not.
- Achievable: You want to push yourself to save more but these budget cuts should be attainable, not impossible.
- Realistic: Keep your goals reasonable and practical. Your budget should be relevant to your spending habits but you don’t need to avoid spending altogether. Budgeting isn’t about depriving yourself, it’s about living within your means.
- Timed: You should have a defined timeline that establishes the start and end dates of your budgeting goals. This holds you accountable to maintain a certain budget for a certain amount of time.
For example, let's say your goal is to save $100 a week over ten weeks. Other objectives might include:
- Steadily increasing the amount of money you have set aside for your emergency fund to $10,000 over an 18-month duration
- Putting $50 a month into college savings account for your kids
- Saving $5,000 for a special vacation in the next 12 months
These goals create great incentives to budget properly, knowing that you’re working towards a worthwhile reward. Then, you need to calculate the amount of money you should set aside to achieve these goals. If you’re new to budgeting, author Brian O’Connor suggests starting with setting aside 2% of your monthly income into a savings account.
3. Manage Your Debt
Another consideration to take into account besides the amount you are earning and spending is how much you owe. Have you taken out loans? Do you have a car payment? Have you racked up a lot of credit card debt?
While you may not be in the financial position to pay off all of your debts right away, you can create a debt management plan that will lower interest rates and put you in the best position to work toward paying this off.
Any good budgeting plan worth its salt should include a plan to eliminate or greatly reduce existing debt. Otherwise, you will continue to pay sky-high interest rates over long periods.
Consider things like debt consolidation, paying more than the minimum payments to reduce the length of loans, reducing your debt-to-income ratio by paying off debt and avoiding taking on more, and asking for lower interest rates.
4. Get the Kids Involved
One of the most overlooked budgeting strategies is to get the entire family involved – that includes your children! Have a conversation with your kids to let them know that you are budgeting, as a family.
Ask them for their help by communicating with them what things they would be willing to give up temporarily or cut down on. Incentivize their cooperation by letting them know that if you can successfully stay on budget for the next 12 months, you can go on that dream vacation as a family.
Discuss what things your kids want and what they need. Your children may need internet access for school, but they may not use that Netflix subscription enough to justify the monthly payments.
You would be surprised what children and teens are willing to sacrifice in the present in the hopes of a more substantial reward in the future. With their help, you can cut down even more on costs.
This can also be done in smaller ways by asking your children to turn off the lights when they’re not using them, to take shorter showers, and avoid setting the thermostat too low in the summer or too high in the winter.
5. Negotiate & Make Smarter Choices
When it comes to the things you’re already paying money for, whether that be a cell phone provider, cable, premium subscriptions, or groceries, you need to be thinking carefully about how you can make subtle changes or get better deals.
If you’re not going to be cutting things out, as your family will always need to buy food, you can start comparison shopping or only buy certain brands when they’re on sale. For other items, stick to the cheaper store brand or buy in bulk to save over time.
If someone in the family is a good negotiator, it’s a good idea to call up your phone, cable, or internet provider to ask for a better deal or to shop around for more affordable plans. Sometimes it’s as simple as threatening to cancel your plan to get offered a better deal.
Consider all of the services you’re paying for and what you can live without. If your family hardly ever watches TV and has a streaming service subscription, then is it worth it to pay for cable? Do you need unlimited data on your phone plans if you’re always connected to wifi? These are decisions you can decide as a family.
When it comes to saving money and cutting down on costs, these five budgeting strategies will be useful in getting you started. While it will take some getting used to, altering your lifestyle can make you appreciate the rare occasions that you do splurge on, like a family vacation, new TV, or your child’s first car.
While budgeting will take some restraint, patience, and willpower, you don’t need to live an unsatisfactory life. Reward your family with small incentives throughout the year to keep you on track and to remind yourself why you’re doing this.
By combining a well-formulated budget and a personal line of credit, your family will have much more wiggle room when it comes to living expenses.