Research shows that only 47% of Canadians use a budget for their spending. The truth is that you might not have a problem managing your finances when single. However, running a family will call for a little more organization financially.
If you are planning on starting a family or already have one, you’ll need to spend more carefully. Part of this will include tracking your expenses. And ensuring that your money is going in the right places
Otherwise, you will struggle to take care of your loved ones financially. You will undoubtedly need a couple of budgeting ideas to get your family finances in order.
So, do you want to get your finances in order but don’t know where to start? If so, this guide will outline a few simple budgets to help you take control of your family finances.
Choose a Budgeting Tool
Creating budgeting plans can be a daunting task. For this reason, you might need some help organizing the variables. Fortunately, a budgeting tool will make your work easier.
By categorizing and tracking your expenses, you will better understand where your money is going. There are many budgeting tools available online. Most of them are free.
You can even find budgeting apps that will help you track your expenses on the go. This is especially useful if you are always on the move.
Calculate Your Monthly Income
After choosing your budgeting tool, the next step is to calculate your monthly income. The objective is to know how much money you will work with each month. While at it, you want to look at all your income streams.
For instance, if you are employed, your salary is not the only source of income. You might also get bonuses, commissions, and overtime pay. If you have a side hustle, that is another source of income.
Once you have all your sources of income, calculate the total and divide it by 12. This will give you an estimate of how much money you make each month.
Don’t sweat if you cannot track your total income accurately. Instead, focus on how much money you make every month.
Track Your Family’s Monthly Spending
Now that you know how much money you make each month, it is time to see how much your family spends. Start with essential expenses such as food, shelter, and transportation.
Then move on to other necessary costs like child care, education, and healthcare. You can label this type of spending as fixed expenses. Most of them will be monthly costs, and their amount will not change much.
You might need to cut back on some of your spending if you have a tight budget. For instance, you can reduce your grocery bill by meal prepping. You can also save on gas by carpooling or using public transportation.
Regarding child care, you can look for cheaper options such as babysitting services. You might need to get creative with your spending if you have a tight budget.
Work with your bank statements if you want to get down to the nitty-gritty of your spending. The goal is to have a clear picture of your incomings and outgoings. Understand your spending patterns to control them.
Differentiate Between Variables and Fixed
Take it a notch higher and differentiate between your fixed and variable expenses. As the name suggests, fixed expenses are costs that stay the same every month. These are mortgage or rent, car payments, and insurance premiums.
On the other hand, variable expenses are those that change from month to month. They include costs such as groceries, utility bills, and gas prices.
Once you do this, you will avoid putting all your expenses in one basket. This will give you a clear idea of which costs are eating into your budget.
Set up a Budget Spreadsheet or Ledger
You have all the information you need in the budgeting process at this point. The next step is to set up a budget spreadsheet or ledger. This will help you track your progress and ensure that you stick to your budget.
If you want to go the old-fashioned route, get a notebook and set up a ledger. You can also use a budgeting app or software.
Create Your Family Budget
Once you have your budgeting system, it is time to create your budget. Start by allocating a certain amount of money to each expense category. Then track your progress to ensure that you are sticking to your budget.
There are several types of budgets but the most common one is the 50-30-20 budget. Under this system, you allocate 50% of your income to fixed expenses, 30% to variable expenses, and 20% to savings and debt repayment.
Another budgeting method is the envelope system. Under this system, you would put cash in different envelopes for different expenses.
For instance, you would have an envelope for groceries, another one for gas, and another one for entertainment. Once the money in an envelope runs out, you can no longer spend on that particular expense.
If you are overspending in one category, cut back on your spending. If you have money left over at the end of the month, you can save it or use it to Pay Off Your Debt
Maybe you are structuring your family budget to pay off your debts. At the same time, you want to ensure your family’s financial security.
If this is the case, create a debt repayment plan. The goal is to pay off your debts as quickly as possible.
To do this, you need to list all your debts, from the smallest balance to the largest. Then, you need to make the minimum payment on all your debts.
After that, focus on paying off the debt with the smallest balance. Once that is paid off, you can move on to the next debt on your list. Continue this process until all your debts are paid off.
Save for Emergencies
Research reveals that nearly 40% of Canadians don’t have enough savings to respond to emergencies. This is not ideal when you have people looking up to you.
Planning for emergencies will play an integral role in caring for your loved ones. For example, what would happen if you or your spouse suddenly lost your job?
You will need an emergency fund covering at least six months of living expenses. Such a fund will help you tide over a challenging period without risking your family’s well-being.
Start small by setting aside $50 from your monthly income. Once you have saved enough, you can put the money in a savings account or a guaranteed investment certificate.
Minimize Discretionary Spending
Budgeting for your family will narrow down to financial discipline. You want to watch your discretionary spending closely. For instance, you can go out to eat less often.
Or you can reduce the amount of money you spend on entertainment. This will leave you with more money for other necessary expenses.
Involve Your Family Members
Unlike a personal financial budget, budgeting for your family will require the involvement of all members. After all, they are the ones who will be affected by the decisions you make.
Furthermore, there will be a difference in terms of needs. For instance, your children might need more money for extracurricular activities.
Or your spouse might need a higher budget for car maintenance. You will need to consider all these factors when creating a budget.
The best way to do this is to have a family meeting. Allow everyone to air their concerns and needs.
Ensuring everyone is on board will make sticking to the budget more manageable. You don’t want a scenario where one person is following the budget while the rest of the family is not.
One of the best ways to get your kids involved is to give them an allowance. You can tie their allowance to specific tasks or chores. This will teach them the value of money and how to budget.
Besides that, it will also help them understand that there is a limit to the amount of money they can spend.
Benefits of Creating a Family Budget
There are many benefits of creating a family budget. For one, it will help you save money. With a budget in place, you can track your spending. It will help you to identify areas where you are overspending.
A family budget will help you make informed financial decisions and address your cash flow problems. When you know where your money is going, you can make decisions that will improve your economic well-being.
Most importantly, keep your family on track financially. If everyone knows where the money is supposed to go, it will be easier to stay within your means.
Implement the Best Budgeting Ideas
Budgeting for your family can seem like a daunting task. But it doesn’t have to be.
With the right approach, you can quickly develop a budget that works for your family. One that will help you save money in the long run.
With these budgeting ideas, you are well on your way to creating a budget that works for your family. So go ahead and get started today.
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