For every person who has a family, the finances affect each and every aspect of upbringing and growing up. Be it managing household expenses or saving for the child’s education or marriage or the expenses incurred towards contingencies such as diseases and hospitalizations. Managing the inflow and outflow of funds plays a crucial role in helping every family member become who they are and shape their lives.
Each family has a budget for their expenditures and sources of income, but it can differ from one to other in terms of saving methods, expenditure pattern and such key factors. Let’s delve into how you can plan your family budget to fulfil all your needs.
What Do You Mean By ‘The Family Budget’? And Why Is It Important?
A family budget, simply put, is the records of the income and the expenditures made in the family for basic sustainability. The key to maintaining family budget is to maintain the spends lesser than the earnings.
A family budget serves many purposes. Some of the major ones are:
1. To spend your money wisely on the things you must have as these are your needs.
2. To save money for the things you like but can live without as these are your wants.
3. To set aside money for unforeseen expenses, for example, if your car breaks down and needs repairs.
4. To stop accidental overspending.
Working out how much money you need for everyday essentials like food, housing, utilities like gas, electricity, phone and water, transport and medical services can help you make sure you have enough for unexpected expenses and emergencies.
Budgeting can help you and your family take the first step towards control of your money. It can also help you avoid debt. And it lets you get on with being a family, rather than spending too much time worrying about your finances.
Getting Started With Budgeting
The key to budgeting is sticking to a basic rule – spend less than you earn. One way to start budgeting is to list what you earn, spend money on and owe. Keep a track of the records in separate folders. For example, all salary statements, all electricity bills, all gas bills, all credit card bills, school fee receipts etc.
The next step would be analyse the data and patterns formed in these bills. It’s good to identify trends and patterns in how some bills are higher through the year. For example, electricity and gas bills are often higher during summer and winter because of heating and cooling.
The next step is to set a fixed amount towards savings every week. This will help you to also take care of the unexpected or sudden expenses for emergency needs and also you can plan your savings for house repairs, family illness or ever some vacations.
The last step of the plan would be to plan your expenses keeping in mind the trends you identified from your bills and income. After you’ve accounted for essentials and emergencies, your aim is to have money left over to spend on things you want.
Money Management: Working Out What You Spend
The most difficult things about making a budget and managing money is keeping a track of what you spend on a regular basis. Spending can be regular (fixed expenses) or irregular or once-off (variable expenses).
Here are some of the fixed expenses you might want to include in your family’s budget:
1. House loan or rent
2. Utilities – gas, electricity, water, phone and internet
3. School fees
4. Health, car and household insurance
5. Credit card and personal loan repayments.
Here are some of the variable expenses you might want to include in your family’s budget:
• Food items
• School uniforms and other school utility items
• House repairs and maintenance
• Medical bills
• Car fuel and repairs
• Public transportation
• Personal items like clothes
• Holidays and vacations
You can definitely overestimate your budget if your income allows. In that case, savings from the overestimated budget can create extra savings for your needs.
Money Management: Working Out What You Want To Save
Your budget will tell you whether you’re currently spending more or less than you earn. If you’re currently spending more, a simple savings plan can help you spend less. And if you’re already spending less than you earn, a savings plan will help you put some of your leftover money aside for unexpected expenses, emergencies and long-term goals.
Build A Savings Buffer
Before you start saving for your wants, you could keep extra savings for financial emergencies. You can use this money for unexpected or emergency expenses, which can help you avoid going into debt.
Set a deadline for your goal. But be realistic, and you’ll avoid feeling pressure. Once you’ve come up with a savings plan, it’s a good idea to review the pros and cons before you start. This way you’ll know how it will affect your family life. If there are parts of your plan, you’re unsure about, seek advice from a registered investment advisor or double-check your calculations before you go ahead.