Setting up a household budget is an important step for gaining control of your family’s finances. A budget that works allows you to balance saving and spending, while making progress towards financial goals. Here are some easy to implement tips for making a family budget that helps you effectively manage your money:
Track Your Expenses
The first step in creating a workable budget is to know where your money is going. Track your family’s spending for 1-2 months using an app, spreadsheet, or notebook. This will reveal your true fixed and variable expenses so you can plan accurately. Include all your expenses, from a gym membership to the morning latte from the local artisan coffee shop.
Involve Everyone
Have a family meeting to discuss what you spend money on now, and what your shared financial goals are. Getting input and buy-in from everyone ensures the budget is realistic and supported. Kids can learn budgeting basics too.
List Your Monthly Income
Detail your net monthly household income from all sources such as jobs, benefits, fostering allowance, and other consistent inflows. Use the most conservative estimate if your income fluctuates.
Prioritise Expenses
Rank your expenses by importance: essential needs first, then savings goals, followed by discretionary expenses. The top priorities get funded first in the budget.
Use Percentages
Allocate percentages of your monthly net income to expense categories based on priorities. Guidelines are 50% for needs, 20% for savings/debt, and 30% for wants. Adjust percentages to suit your situation.
Allow for Flexibility
Have some wiggle room in your budget categories to account for unexpected expenses and inflation. Adding a buffer of 10% above projected expenses creates flexibility.
Automate Savings
Set up automatic transfers from your pay or current account to savings accounts for goals like an emergency fund or university costs. Automating savings helps ensure you hit targets.
Re-Evaluate Quarterly
Review your family budget every 3-4 months to check if your percentages are still aligned with your income, priorities, and costs. Make adjustments as needed.
Use Money Management Tools
Apps, spreadsheets, or paper budgets all work. Choose a tool you’ll stick with to monitor your spending and track progress against your budget.
Make Saving a Habit
Get into the discipline of “paying yourself first” by saving a set amount each pay cycle before spending on discretionary items. Consistent saving leads to financial security.
Communicate Openly
Have regular family money meetings to review the budget and discuss any changes in income or expenses. Open communication prevents budget surprises.
Adjust When Necessary
Life changes like a new family member, job loss, or income increase will require re-thinking your budget. Be prepared to evaluate and adjust category allocations as needed.
Reward Progress
Celebrate hitting savings goals and other budget milestones. This positive reinforcement helps everyone stay motivated. Even small strides are worth acknowledging.
A budget tailored to your family’s financial situation and goals will provide structure and purpose to your spending. Following these tips will make your household budget work optimally. Review and revise it as your circumstances change over time.
