If you’re among these people, you know how unsettling it is to live on the edge of financial uncertainty, where an emergency can quickly send you into debt.
An effective way to stretch your money is to draw and stick to a family budget. But if you’ve never made one, you might not know where to start or what to include.
Keep reading to learn how to plan a family budget that’ll work for you.
Know Your Monthly Income and Expenses
The first step to setting up a family budget is to have a clear picture of your household’s income and expenses. If you’re the sole breadwinner, your income is the household’s income. But if you and you’re partner are employed or in business, your combined pay makes the household’s income.
With the income mapped out, next is to track your household’s monthly expenses. Keep a record of all the money going out and indicate the purpose.
Because this is a family effort, ensure every member is keeping track of expenses. If your kid uses her pocket money to buy movies tickets, let them record that.
Cut Back on Spending
After a month of tracking your finances, you’ll have a clear view of your income vs expenses.
So, how much money is left after expenses? If you’ve little or no money left, you’re treading on thin ice. This is why you need to find areas to cut back on spending.
Go back to your expenditure record with your family and find things you can cut out. For instance, if you have cable and streaming subscriptions, do you really need both? Drop one.
What about money spent on restaurant meals, outdoor adventures, and other luxuries? If you go out for dinner four times a month, scale down to twice or once.
The goal here isn’t to degrade your quality of life but to free up your income so that you’ve money left to save and invest.
Make a Plan for Paying Off Debt
The average American household owes over $137,000.
Whether you hold individual or joint debt, part of creating an effective family budget involves making provisions for it.
Start by paying off high-interest debt or if you’ve multiple loans, consider consolidating them into one. Assuming you successfully cut back on your spending, you’ll have more money at your disposal, most of which you can channel into servicing debt.
Plan for Your Family’s Future
A common mistake many households making when planning their finances is thinking short-term. They just want to take care of the present and prepare for the immediate future.
However, long-term thinking is the key to successful family budgeting.
You need to know how your family’s size will change over time and prepare accordingly. Visit fpachicago.com to learn more about family planning and how it will help you create a future you can afford.
Set Up a Functional Family Budget
With this guide on planning a family budget, you’re now in a solid position to make your household income do the most for your family.
Remember, creating a budget is just one part of the job. The other part is sticking to it.
Keep tabs on our blog for more financial tips and insights.