I am constantly talking about ways to stay on track with a family budget, so is it hard to believe that up until recently we didn’t actually have a set budget? We really just created an actual budget. We kind of just cruised on this notion that as long as our bank account stayed out of the red, we were on budget. But there are many flaws to this system including the glaring problem- what happens in case of some unplanned, unforeseen circumstance?
Well, we found ourselves facing this exact question when our only “reliable” vehicle decided it did not want to be a moving, working vehicle anymore. In the middle of a 12 lane intersection. During rush hour. On the day that I had a very important meeting at work.
Good times. Not!
Unfortunately we had to make a difficult decision and purchase another vehicle. This was an aha! moment for me. While our income may object, we definitely needed to start finding more ways to save money. We needed to start being more accountable for our finances. We needed to start some serious adulting and it was going to be hard.
I will say this, however. Setting a budget for our family was definitely a difficult task, at first. Once we actually started implemented our family budget, I felt better. We were more conscious about what we needed and what we wanted and were very quickly able to assess if we were being smart with our money or a little frivolous.
My husband and I thought we were money conscious before, but really we were just aware of the bottom line at the end of the month. There really is a difference.
Here are some ideas on creating your own family budget.
- Make sure you have the time dedicated to make your budget. This is not a conversation that your family should have five minutes before soccer practice. Serious thought needs to go into this, and some emotions may run high. Also, be prepared for this to extend to more than one meeting. If something is truly important, it deserves to have undivided attention which can be extremely difficult with a large family.
- Consider who is included in the planning session. This definitely varies family to family. While the majority of our conversation consisted of just my husband and I, we did take input from the children. My husband and I explained to the kiddos what we were doing and how important it was. Then we also were clear about the fact that some things were going to change, and not all of the changes were going to be desirable. We felt that our decision to include them was important for two reasons. First, it reinforced that we value their opinions and input. They may be little but they mean a whole lot, and we try to remind them of this consistently. Also, it helped the children understand the importance of what we were doing. We are not that family that tries to act like money is not a contributing factor in many decisions we make, but we also understand that they may not comprehend money restraints due to their ages and maturity levels. This meeting helped our children have a little window into our reasoning when we deny that awesome, amazing, EXPENSIVE camp that they are dying to attend this summer.
- Make a goal (or goals). It does not have to be a publicized goal. Your best friend or your mom does not need to know what your goal is or why you set it, but you need to know what you are trying to accomplish. Perhaps you want to pay off debt, or save for a fantastic vacation. Maybe you want to cushion that emergency fund or prepare for retirement. Maybe you just want to see where your money is going. Maybe you have two short-term goals (should take less than a year to accomplish) and one long-term goal. Your prerogatives are your own. Write down possible goals to determine which goals are the best for your family.
- Make the goals achievable. Please don’t set yourself up for failure by setting unrealistic goals. I have soooo done that in the past. It makes you feel depressed and unsuccessful, causing you to slip and not make progress toward real goals. Think of what is truly important for your family and decide how that goal is possible. The word budget often seems like a negative thing, but actually it doesn’t have to be. Use your budget as a tool to reach your goals. It outlines where you need to be right now in order to get to your desired location- similar to a map.
- Have documentation in front of you. Have your bills and pay stubs so that you can actually see where the money is coming from and where it is going. We may think we know the money trail, but it may be a drastic difference once you are looking at reality. My hubby and I thought we were doing really well with our money. Then we printed our bank statement and started noticing how we were nickel and diming our way through our money. Once we highlighted the necessary expenses, we ended up staring googly-eyed at the other numbers. We definitely did not have the self-control we thought we had. Having the physical documentation in front of us was definitely an eye opener.
- Determine how your family defines expenses and income. This will definitely vary family to family. Some families share everything, including expenses and income, equally. Other families keep budgeting separate. I have friends that have such unique ways of planning family expenses I cannot begin to explain or understand them. There is not a blanket acceptable way and you should not worry about approval from outside sources. But if you are deciding to keep things separate, this needs to be addressed during your sitdown meeting.
- Calculate your net income. Your net income can sometimes be called your take home pay. Net income is listed on your paycheck but if you have various forms of income you may need to make some calculations. Your take home pay includes any money that you bring in- child support, alimony, side jobs, etc. should also be included. Items such as taxes, 401k and Social Security deductions, should not be included.
- Determine your NEEDS. These are the items and bills necessary for your day to day life- housing, food, medical expenses, etc. Is coffee a need? Probably not, but don’t despair. There is a much happier step down below.
- First, focus on the expenses that occur every month. Recurring debt should include your rent/mortgage, car payments, insurance, credit cards, etc. This is why you should have all of your statements and bills in front of you- so you don’t forget anything (such as one of your car payments, like we did the first we sat down to plan. Ooops!).
- Now add in your flexible expenses. Items that possibly change monthly are groceries, gas, kids activities, family entertainment, etc. We always say that we are going to stick to a certain number figure for groceries, but rarely do we stick with it. If you need to cut back on spending, these are the expenses you may be able to trim.
- Identify some of the things that may not be a need, but are important nonetheless. Insert coffee here. And chocolate. And possibly wine.(Told you that you would be happy again later.) This is going to be different for everyone and can be of varying degrees. Perhaps you feel like a coffee from a chain makes you feel and perform better in the morning. Maybe you think that it is necessary for you to take time out for yourself and have a pedicure or a girls night out. Mommas need taken care of too and that’s okay. This is what will help you actually STICK to the budget. Family fun can be on budget if you plan carefully enough. Check out my post about Disney on Ice here.
- Match the numbers to your budget goals. If your goal is to double your savings in six months, are you on track to do so with your current spending habits? Or do you need to alter some of your spending patterns?Take the coffee, for example. I pretty much need it on Mondays (most humans who come in contact with me can confirm to this). I prefer to actually go to Dunkin on Mondays because no matter how hard I try, I cannot replicate it perfectly. However, for the other days of my week I brew my own coffee at home. I buy the huge bag of coffee because it is cheaper in bulk, then add my Dunkin creamer and Hershey syrup for my iced mocha. If you go to get your nails done once a month check to see if they ever sell gift cards at a discount during special promotions.
- Review and reevaluate often. Check back in one month and see how you did. Did you cut back if you needed to? Did you spend less than the month before? Or did you just make smarter decisions with your money? Decide if your budget goals are still appropriate. Maybe, now that you are more aware of where your hard-earned money is going, you want to save more. How can you adjust your budget to work for your family? If you feel like you are stuck don’t be afraid to ask for help. Family, friends, or even professionals can offer you insight that you may be overlooking.
- Do not be too hard on yourself. Obviously you should be firm with your goals and attempt to work toward them. However, remember you are human. You can (and will) make mistakes. Just, as with everything else in life, learn from those mistakes and use them to guide future spending.
Do you have any secrets that helped you make and keep your family budget? Is there anything that you feel you need help cutting back on? Leave them in the comment section below.