Is planning your family budget a task that keeps you up at night? Know that organizing your family’s finances doesn’t have to be a source of discord among your family members and can even increase your closeness. Creating a calm environment where everyone knows how they can contribute creates more empathetic relationships and develops responsibility in younger people.
Why is planning a family budget important?
Before I start listing tips, I need to clarify the importance of having a planned budget from a financial and relationship perspective. In terms of finances, it is crucial to know how much resources you have available to use assertively for daily expenses. From the perspective of interpersonal relationships between members of your family, you will strengthen the desire for collaboration and the relevance of your position in the general context.
Involving everyone involved when deciding how the family’s money will be used gives them a clearer understanding of the impact of each new expense. This is essential, especially for those with children and teenagers at home, as it is difficult to have a clear understanding of concepts such as money, expenses and waste at an early age.
Furthermore, talking about the family’s income and how each person can contribute to increasing the emergency fund and even the resources to take a trip at the end of the year creates an environment that is more open to dialogue. It is necessary to deconstruct the image that only adults should be involved in planning the household’s finances.
Check out 10 tips on how to budget your family without a crisis
Below I have listed 10 tips to help you plan your family budget without facing resistance or difficulties.
1 – Determine the present situation’s diagnosis.
The first step to getting your family’s finances in order is to understand the current situation. Are your bills up to date? Are there any credit card or installment payments to be made? Is your family in debt? The answers to these and other diagnostic questions are essential to knowing what direction you need to take to plan your budget.
For families that do not have future financial commitments, such as installments or outstanding debts, it is interesting to establish short, medium and long-term goals and objectives. Basically, it is about knowing what you want to achieve in the coming years to determine the amounts to be saved and how these resources will be saved, whether in savings, investments or others.
If there is some level of debt, the priority is to assess the severity of the debt, that is, to what extent current resources cover the debts, and establish a strategy for making payments. By knowing the family’s monthly income, it is possible to determine how much of these resources will be directed to paying off debts. It may be necessary to make some expense cuts in order to reorganize finances.
2 – Include every member of the family in the planning
In practice, everyone contributes to the generation of expenses in the household in which they live, so it is important for all members to get involved in finding relevant solutions. Hold a meeting with all family members and write down expenses, such as children’s school, monthly grocery shopping, rent payments, among others.
Costs can be divided into groups, such as those that are influenced by everyone (electricity and water, for example) and those that belong to each individual member. The idea is to create a deeper sense of responsibility for their own impact on the budget.
Children can be encouraged to turn off the TV after their program ends and to brush their teeth with the tap closed. These recommendations will make much more sense in a participatory context of family budgeting. By exchanging ideas about the numbers, it is possible to come up with different ideas for improving the good use of resources.
3 – Identifying small expenses
Still following the logic of involving family members in the preparation of the family budget planning, it is a good idea to ask each member to write down their expenses in a notebook, from the candy bought at the corner store to a new set of bath towels. Some small costs or those generated by everyday needs may go unnoticed, but have a big impact at the end of the month.
After this first month of writing things down, ask family members to try to cut some of these expenses so that the money saved becomes a positive experience, such as going out for ice cream or even to the movies (it all depends on how much you can cut back). This is another exercise in recognizing the value of money and how using it well can be rewarding.
4 – Plan an emergency fund
Never knows what the following day will bring in economics, so in good times it makes sense to prepare for emergencies that would keep you going in an austerity scenario. If you have concluded that you are financially stable, then it is prudent to calculate what percentage you must save each month.”.
Ideally, you’d have a clue of the amount needed to support yourself each month and at least six months’ worth of emergency funds covering your family’s life. This way, if something comes up, you can sleep peacefully with time to reorganize. Probably the most difficult challenge most families face in a crisis scenario is the despair of not knowing how they’ll pay for the following month’s expenses after losing their source of income.
5 – Cut unnecessary expenses
When you put down all the expenses on paper of your family, you will find some unnecessary expenses that may include buying new clothes every month and going to the cinema every weekend and eating out every Sunday etc. Here it is not about eliminating moments of party and enjoyment but making suitable replacements with an economic viewpoint.
For example, it might be agreed that going to the cinema is only to be done during one weekend of the two weekends, and the second weekend will be spent in a film or series at home. Additionally, the family members need to be encouraged to be less consumerist. Buying more than what they need products has a problem in relation to the budget, but it also damages the environment.
6 – Review the service prices
From time to time, it is worth reviewing the prices of services, such as internet and telephone. What was advantageous in the past may no longer be interesting from a financial point of view today. Some services may have their prices gradually increased, so that they jump from a value X in the first month to a value Y two or three years later.
Compare the cost of hiring the service with the current price and analyze whether the cost-benefit ratio is balanced. If you conclude that it is no longer worth keeping the service at that price, start researching potential replacements. The savings to the family budget that can be made with these reviews alone are quite significant.
7 – Divide the budget into categories
Breaking down your budget into distinct spending categories allows you to be more aware of waste. Set spending limits for each category and monitor your spending throughout the month to see if you have already exceeded the limit or are close to it. It is also a good idea to have an order of importance between the categories, prioritizing the most relevant ones.
8 – Set a common goal for everyone
Whether it’s a year-end trip, buying a bigger TV or building a swimming pool at home, having a goal that everyone in the family shares can help encourage them to save money.
To make the process of achieving this goal even more interesting, it’s worth keeping track of how much of your savings goals have been met so far. Every month, get your family together and tell them how much you’ve saved and how much you still need to save.
9 – Don’t overdo financial control
Managing your family’s finances well can be very positive, but it is important to be careful not to overspend. Not all spending on going out and having fun should be seen as superfluous. Spending quality time with your family is also essential to keeping your budget out of crisis.
10 – Listen to your family
An essential part of working out a family budget together with your family members is being open to what they have to say about their priorities and desires. Something that seems irrelevant to you may be of great importance to your partner or your children .
The pursuit of everyone’s happiness should be one of the commitments of financial planning, after all, dedication to work has as one of its main objectives contributing to general well-being.