You probably have heard or read enough articles on budgeting. However, almost all of them talk about budgeting for individuals and organizations. Only a few talk about family finances, and how to budget and plan family expenses. If you are interested in maximizing finances for your family, and of course, you should, this article will teach you how to do that.
A question about why you should budget and plan family expenses since the individuals in the family have their personal finances planned out is common.
Below are some reasons why every family should have a budget and stick to it.
It helps you keep track of your long-term goals
Every family should have long-term financial goals. This is because you need to plan for the children. A budget helps you to plan for those goals, save your money, keep track of your progress, and turn your aspirations into reality. If you spend without aim, a major achievement like building a house or starting your own business may never be achieved. Having a budget will help you live within your means and save for a rainy day.
Budgeting stops you from spending money you don’t have
Most of us tend to spend money that we don’t have on family expenses. People overshoot their spending capacity. Resulting in debt.
However, if you have budgeted your expenses, you will never find your family in such a bad financial position. This is because you would know exactly how much you earn individually, how much you contribute to the family account, how much you can afford to spend each month on family expenses, and how much you need to save.
You are better prepared for emergencies
A member of the family getting sacked, falling sick, or even a death in the family, all these and other incidents can lead to financial trouble. That is exactly why we all need an emergency fund.
An emergency fund should consist of at least three to six months of your family expenses. This fund will help you brave any storm that might occur. Building up an emergency fund could take some time, however, it is well worth the effort.
How to Create a Family Budget
Follow these steps to set up your family budget
Calculate Your individual Income
Your family finance will come from your individual contribution, or from a family business. Start by figuring out how much you and your partner, if applicable, are bringing in each month. If the income comes from the profits of a family business, get the average profit. If you or your partner have individual side-hustle or own your own businesses, be sure to include this income as well. Also, if your income varies, take an average.
Most times, you might want to create a family expenses account. If this is the case, determine how much money goes in here from all your sources of income mentioned above.
List Your Expenses
This step is as important as the first. After you have an amount that represents how much income is available for family expenses, it’s time to look at those expenses. Consider your rent, any bills, and other expenses such as childcare, groceries, formula, and more.
List the essentials first, and subtract the total from your income. Then allocate some of the remaining money toward an emergency fund, retirement, college savings, and paying off debt (if any). What is left can be used for fun extras, like family vacations, movie nights, dinners out, or whatever your family likes to do for fun.
Track Your Spending
You need a way to make sure you stick to your family budget. This is important as two or more people are sharing and spending the money. You can use spreadsheets, bank statements, receipts, and budget apps to assess your family’s actual spending.
Remember that these decisions should be unanimous between family members, especially those contributing to the budget. Cut spending as much as you can, and save your money with a saving plan that guarantees high interest, like Reaprite. With Reaprite, you earn up to 16% interest per annum on your savings. Click here to download the app and start saving today.