Managing a household is not an easy job. There are several moving pieces and some days you may feel like you’re swinging on a pendulum. In addition to cleaning, laundry and grocery shopping, managing the household budget can sometimes feel like an overwhelming task. Today, I am sharing a few simple budgeting tips that will help you achieve your long term goals.
Simple Budgeting Tips for Families
Creating a budget for your family is important as it should help you spend less than you earn. It doesn’t matter if you are living paycheck to paycheck or earn seven-figures a year. A budget is an important tool that shows you where your money is going.
Getting Started With a Simple Budget
1| Where Was Your Money Going? Gather the last two months of bank statements, credit card bills, utility bills, and investment accounts, like your statement from the MEFA U.Fund College Investing Plan account. This is the name for the Massachusetts 529 college-investing plan. It’s a tax-advantage savings plan offered by the Massachusetts Educational Financing Authority managed by Fidelity.
2| Where Is Your Money Coming From? Write down all income sources you, and your spouse, receive each month. If you’re self-empoloyed or work on commissions alone, tracking income can be tricky. What some people with irregular earnings do is use their lowest monthly earnings or an average monthly earning. If you choose to use an average, remember to be diligent about saving during the months where you are earning more.
3| Where Should Your Money Go? Identify all expenses for your household. Your monthly housing, car payment, insurance premiums, and cell phone bills are probably consistent each month. Write those items down first. Categories like utilities, groceries, gifts, and college savings accounts are more likely to fluctuate each month. Utilize your statements and track each category accurately – and honestly.
If you’ve been able to pay all of your bills on time each month avoiding late charges, I would say you are doing okay. BUT, you still need a budget. WHY? Because you don’t really know where your money is going. You’re spending and spending, but what does your savings really look? Have you put as much money into your MEFA U.Fund College Investing Plan account as you could have? Probably not. But that’s okay. This is why you are taking the time to create a budget.
4| Do I Spend Too Much Money? Add all of the numbers in your expense category. Is that total less than your income? It should be. If not, you need to take a closer look at the spending in certain categories.
Do you earn enough money? For most people, the answer is going to be “NO!” However the correct and honest answer to that question is probably “YES, I just don’t spend it on what I should.”
Knowing the difference between a “need” and a “want” can help identify where you are overspending. Do you really need a fancy coffee from the shop on the corner every day? Or would once a week be sufficient?
In my area, a fancy coffee is about $3.50. Do I want to spend $910 a year on coffee? Or do I want to save $728 by only going once a week?
5| Review your budget regularly. It is important to review your budget each month to be sure you are on track. After the first month, compare the actual expenses to what you listed in your budget. How did you do?
Budgeting doesn’t mean not spending. It means being responsible and spending on what is important to you.