A family budget is crucial if you are serious about financial planning and stability for the family. I don’t know about you, but one of the major life lessons of the past year is that the proverbial ‘rainy day’ can actually be a monsoon. For many of us, providing financial stability for our family is a work in progress. It’s a bid to learn, share and put into practice healthy financial habits that will facilitate that stability. One major way to do that is with a family budget. Even though I had a pretty good idea how much was coming in for my family, and had a rough idea of what we spent each month, I decided that for 2021, I wanted to see what was coming and going out in black and white.
So, I decided to start tracking every dollar coming in and going out. And boy! What a revelation that turned out to be. The shock had me wondering who the hell thought this was a good idea. I don’t need that kind of negativity! (Tears)
Despite having an ‘idea’ what our typical expenses were, I was also forced to look at larger, infrequent expenses as well. By tracking every dollar, I was made to see an ugly figure for eating out each month, including the excess of what’s budgeted in bold red. (Real tears). I was also able to see how little spends which didn’t really register mentally added up to a much more substantial sum at the end of the month. Tips, lunch, a drink on the road, that extra pot, etc. Take my word for it, the sum looks much more frightening when it comes together.
Preparing to Start the Family Budget
1. Give the Family a Heads Up
After some research and deciding to go ahead with this, the next step was speaking to the other spender in the family, my husband. Luckily for me, there’s only one since my daughter is four. For larger families, there may be two or three other people to speak to.
I told my husband what I wanted to do. He wasn’t thrilled with the idea of saving every single receipt or everything moving out of his account, but he’s a very supportive man and agreed. It wasn’t too hard for me to keep receipts. I’m a ‘receipt stuffer’. If I got one, I can usually find it stuffed in my purse or bag in heaps for weeks.
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2. Prepare Your Tools
Storage – Get a Large Envelope or Paper Filing System
You never realize how many purchases your family makes as a unit until, you have to store them all. Initially, I thought a regular sized envelope was enough. It was not. Try getting a US or Legal sized envelope to keep them in one place. Keep in mind you’ll need to keep each month’s receipt separate. No sense in having them all cluttered together. Store them in a drawer.
Some receipts will fade rather quickly. I suggest scanning them for digital copies, so that even if they fade, you have them for your records.
Whether you chose to use an App or writing in a designated book because you might be a scribe, figure out where you’ll be recording your information. There are many app you can use, that provide advanced features like connecting to your account, uploading receipts, etc. You can also find preformatted templates online.
Personally, I love MS Excel. It’s a staple in my business for working with figures and financial modeling, so that was my first choice. Google Sheets (Google’s excel alternative), is available in Google’s suite of applications right along with Gmail, Drive, Photos, etc. The application has a template for personal budgeting and this is what I use and I love it. It allows data analysis as you input information and allows for your to set expectations for spending and income, as well as compare the figures as you log transactions individually.
Tracking the Family’s Spending
3. Observe for the first Month
That’s it. For the first month (or two if you had a weird month), just observe. Don’t try to skew your habits or the figures. The goal is to get a reality check on your habits by seeing the results laid out in front of you. If you try to manipulate it before you know exactly what the numbers are, you won’t have the accuracy you need, despite the fact that you think you know what you spend.
By simply logging, you’ll also be able to tell where exactly your excess spending occurs and try to cap or reduce the amount. For example, if you spent $100 on groceries but you think the amount is too much, cutting that to $80 may not be feasible if the issue isn’t that you have gotten more groceries but rather that prices of goods have increased. Now you have an unrealistic budget of $80, when your family requires $100 in actuality.
Create the Budget
Now that you have seen all the family’s spending in one place, you can tell exactly where money is trickling from. For example, the cost of eating out was 50%-100% more than I thought it was when I started recording. And I already thought it was too much!
By knowing exactly what the figures are, you be able to use more realistic figures for each category of spending.
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4. Identify Fixed Expenses
Identify your fixed expenses. These are figure you cannot manipulate or change monthly. For example, rent/mortgage, insurance premiums, school fees, loan payments, utility bills (usually the same amount). Savings should be included in my opinion. (Saving after you spend is a sure fire way not to save at all, particularly when you are in the lower or middle income bracket.)
These expenses are a given. There’s nothing you can do about them on a month to month basis. Whatever your income is, is less these expenses.
5. Now You Create the Budget
Now that you have covered all the variables affecting your spending, you can sufficiently analyze the pattern and adjust how much you was to cut from each area. You can decipher what you want to spend where. Don’t forget to include leisure/entertainment amounts (however small).
The Hardest Part
6. Stick with the Budget
Sticking with the budget is undoubtedly the hardest part of the process. But if you are disciplined (and even if you are not, you can put helpful mechanisms into place to help you get better.) you can do it!
Do you have a family budget? Do you have any tips to share? Let’s talk in the comments!
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