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Is your money working for you or are working for your bills? Many Americans would probably say the latter. According to Nerd Wallet the average American owes, over $7,000 in card debt, $57,000 in school debt, and $28,000 on a car loan. Creating a family budget is within everyone’s reach, but creating a successful one requires some particular methods. Here are some tips to help you create a successful family budget.
Get Everyone on Board
The more inclusive your budget is, the more likely it is to work well for your family. Include every family member who is old enough to understand. A budget affects everyone, and it’s a good idea to listen to input from other members of the family.
Teach your children how to handle money at an early age. They can learn the importance of saving, giving, and wise spending. Teach your kids the cost of living in your home and grocery shopping. Show them how they can help save you money that can be saved for something special like a trip or new game console, etc.
Leave Room for Luxuries
Some budgets are so tight that it may seem there’s no room for any luxury. But if you get a bit creative about what constitutes a luxury, you will probably find you can in fact afford some kind of privilege or luxury. It could be something like buying your favorite brand name item at the store instead of settling for the store brand, or maybe buying fresh fish instead of frozen once a month. Maybe ordering a pizza or Chinese food is a luxury for your family that you can include in your budget.
If you are budgeting with more money, your luxury could be a family vacation or a new piece of electronic equipment. The point is to include some kind of luxury in your budget. This helps keep family members motivated and makes the budget easier to deal with.
Get a Good Idea Where Your Money Goes
To do this, it’s a good idea to take your last three months’ worth of income and create an average. When in doubt, round down so that surprises will be more likely to be on the plus side. The same is true for expenses – include at least three months of expenses to get a true picture.
By tracking the past 3 months you have a clear picture of the situation with your spending. This is a good thing to do every few months to see if your spending is under control. Things have a way of relaxing and resetting back to old habits. Look at necessities first: house payment, utilities, groceries. Look at entertainment, eating out, and other more optional expenses. A successful family budget requires an honest look at where the money goes.
Evaluate each one: Do you need it? Are there any ways to reduce it? This might include a home refinance, moving to different car insurance, requesting a lower interest rate on your credit cards, or cutting the cable and switching to monthly services like Hulu or Netflix.
It takes a few months for a budget to sort itself out and become a habit. There will be bugs that need to be worked out. Understanding this can help you stick with it as it needs tweaking and adjusting.
It takes time to learn how to keep on track with a budget. You need to give yourself time to learn new habits of spending. But, in time, you will see the rewards as debts get paid off and you see more money in your savings.
For some, using software to lay out the family budget is helpful. Software that is designed for the purpose may make creating the budget easier. It might be as simple as a spreadsheet and calendar to track when bills are due and how much each costs. Or you can use something that syncs up with your banking. Just don’t feel like you need to spend a lot on a complicated system.
Optional and Necessary Spending
This distinction is harder to make for some people than others, and it’s tougher in some family dynamics than others. What one person thinks of as a “necessity” might be looked at as a luxury by someone else. If you’re in doubt, check budget formats and accepted principles in this regard that come from a third party.
Don’t let your budget create a rift between you and your spouse, work together on deciding what things are necessary and what is optional. Unless your financial situation is in very serious trouble, give one another some spending room for those “special” optional expenses like your manicures or his fishing equipment.
Pay off Debts
It’s unpleasant, but paying off debts needs to be high on the priority list for your family budget. The sooner they’re paid off, the sooner you’ll have more money left over! Begin by making sure you are paying all debts on time. You avoid paying late charges. Next, decide how much you can put aside to pay down debts. Then, look for the debt with the highest interest and use that money to pay it down.
By paying down the ones with higher interest first, you save money in the long term.