The Golden Rules of Managing a Family Budget
Managing a family budget can be challenging. Each member of the family has different needs and wants, and these change over time.
Spend some time thinking about how best to divide up the money you have, so that your spending and saving are aligned with your family’s goals.
Update Responsibilities
Before having children, you and your partner may have split the mortgage or rent 50/50 or decided that you would pay the energy bill while your partner bought groceries. You may have set up a joint bank account to pay for some or all your shared expenses.
When you’re expecting your first child, it’s important to discuss these responsibilities again and make some changes. For example, you may have to pay a higher proportion of the household expenses for some time while your partner is on maternity or paternity leave or goes back to work part-time.
It’s also a good time to update your household budget together. You’ll definitely need to add a category for baby-related expenses! On the other hand, you may find you can cut back in other areas, such as eating out.
Set Up an Emergency Fund
Often families go into debt because they can’t afford to pay for a large unexpected expense, such as a repair bill for a leaking roof. Since their budget is already tight, they resort to using a credit card or another form of expensive borrowing to pay this bill.
If you haven’t already done so, set up an emergency fund to protect your family from the potential financial effects of an unexpected event. Keep your emergency fund in a separate, easily accessible savings account and pay a certain amount of money into it every month.
Even if you can only afford to pay a small amount into your emergency fund, it’s important to do so. Your family needs a financial buffer to protect them, no matter what happens.
Decide on Your Family’s Goals
What are your family’s reasons for living on a budget? Discuss these with your partner initially and, when your children are older, involve them too.
Your reasons may be:
· To pay off debts
· To save for a down payment on a home
· To save for your children’s education
· To save for an annual holiday
· To save enough money to travel for several months or years.
Don’t skip this step because it’s important to clarify what you want from life as a couple and a family. There are no right or wrong answers. All that’s important is that you’re honest about what you’d like to do and achieve in life.
For some families, improving their home is more important than an annual holiday, while other families may dream of travelling the world together.
Deciding on your goals as a family will help you keep to your budget, even when the going gets tough, because you know the ultimate reasons why you’re living on a budget: to save for a future that you all want to experience together.
Open Savings Accounts
Once you’ve clarified your goals, you can begin working towards them.
Open a savings account for each of your family’s goals. You may decide to choose just one goal to start with or you could begin saving towards two or more goals.
Try not to over-stretch yourself, though. It might be better to dedicate all your spare resources to one important goal rather than saving relatively small amounts for several different goals.
Decide how much money you’ll pay into your savings account(s) each month and set up automatic transfers.
Budget for Things Your Children Will Need
Don’t forget to include things your children will need in your budget, for example:
· School supplies
· School trips
· Birthday gifts for friends
· New or second-hand clothes to replace clothes they’ve grown out of
· Haircuts
· A reasonable amount for clubs, activities, hobbies and entertainment.
Parents know that all these things add up to a lot more than you expect over a year! It’s therefore a good idea to set aside a regular amount of money each month in a separate account, so that you always have enough money available to pay for an unexpected school trip, for example.
Get the Whole Family Enthusiastic About Keeping to a Budget
If your family know exactly why you’re living on a budget and are excited about the prospect of moving to a larger home or going on a beach holiday, they’ll be more likely to help you keep to the budget.
Encourage your partner and children to look for special deals that will help you save money, such as ‘kids eat free’ deals at restaurants and ‘two for one’ cinema tickets. That way, you can have fun as a family while keeping to your budget.
Ask them to research money-saving alternatives to the products and services you usually buy. Your children could, for example, cut out coupons that you can use to reduce your grocery bill.
Ask your partner and children what they’d like to eat for dinner in the next week before you plan the meals and write a shopping list. If they’ve requested meals they love, they’ll be much less likely to ask for a takeaway or dinner in a restaurant.
Look for Ways to Generate Extra Cash
Hold a family brainstorming session to think of as many ways as possible you could generate extra cash to put towards your goals.
Some ideas include:
· Holding a garage sale to sell small items such as DVDs you no longer watch, toys your children no longer play with, and clothes your children have grown out of.
· Doing odd jobs, such as gardening, cleaning and cooking, for neighbours, family members and friends.
· Going on mystery shopping assignments.
Above all, look for ways in which you could spend time together as a family while earning some extra cash.
Let Your Children Manage Their Own Pocket Money
Giving each child pocket money every week or month is a good way of teaching them to manage their own money.
Learning money management skills for themselves will help your children to understand why you have a budget and to support you in keeping to it.
Review Your Family Budget Regularly
Schedule time to sit down and review your family budget regularly. This could be as often as once a month or as little as once a year.
Look at your budget and ask:
· Which areas are you doing well in?
· Which areas need improvement?
· Are there any categories in which you consistently over-spend? What are the reasons for this? Do you need to increase your budget in these categories, or could you cut down?
· In which area(s) have you under-spent? Why is this? Could you make further savings?
· Are there any other areas of spending that could be reduced? Look at regular payments and subscriptions. Could you get a better deal by switching to another provider? Do you really need and use everything you pay for?
· Are you on track to meet your savings goals? Could you increase the amount you save each month?
Managing a family budget is an on-going process. Many adjustments to your budget will be made as your children’s needs and priorities change.
Your goals and priorities as a family will also change over time, so it’s important to keep an eye on your budget and update it regularly.
