Our homes are special places for us. They’re where we rest our heads after busy days. They’re where we cuddle with those we love. But the fastest way to make our home life stressful? Talking about money. Planning a family budget stresses many of us out! But managing our home finances doesn’t need to be complicated. Before working on your household budget template (download a free copy by clicking right here), make sure you consider these three essential ideas. Curious to learn more? Keep on reading for the three essential ideas you need to consider when establishing a family budget.
Family Budget Essential Idea #1: You Need to Agree to Disagree
What’s the first pillar of successful home finances? Hint: it has nothing to do with money and has everything to do with relationships. To make a successful family budget, everyone needs to be on the same page.
Shared Financial Goals for Your Family
What do I mean? To achieve long-term financial goals, everyone must share common long-term goals and understand how to achieve those goals through the disciplined use of home finances.
What kind of goals are we talking about? Saving for the kids’ education, planning for an overdue vacation, or simply trying to make it through to the next month.
Why is this idea so important? Because most families do not have the monetary capability to spend as they wish while achieving savings goals. Most people and families get accustomed to the lifestyle that their income provides.
Living Above or Within Our Means
We often push the limit of our consumption to the level of their income, and as our income increases so does our house size and lifestyle choices. Do you feel me on this? Unless family members all agree to curb spending and scale back, achieve desired long-term goals will remain challenging.
Now, how do you get the family to agree? This alignment can be tricky, and we’ll discuss how to begin a financial conversation with a significant other in an upcoming post. (Stay tuned!) For now, try to find common ground that feels achievable, fair, and productive, either the long-term goal kept at the center of the conversation.
Family Budget Idea #2: Work through a Budget Template
What’s the second essential step in making a family budget? You got it. Budgeting.
Income, Fixed Expenses, & Discretionary Expenses
If you haven’t yet read the guide to establishing a rock-solid budget, take some time to print the budgeting template and review your income, fixed expenses, and discretionary expenses. Before you set budgeting goals for your family, you need to clarify how much income and expenses you have.
Also, by working through the budget template, you can better monitor your monthly performance towards achieving your long-term financial goals. Hop over to the post about how to make a family budget using a budget template if you’d like to start there.
Why Use a Budget Template?
Let’s say your family agreed to limit spending for the month. Nicely done! But what if your car died? What if the unexpected car repair wrecked your finances for the month? Unless you make quick spending adjustments you can kiss that nice vacation goodbye.
Budgeting is the spending gauge that keeps you on track in such situations. Budgeting helps us navigate unforeseen expenses. Also, budgeting helps mitigate stressful situations by planning and preparing in advance.
Overseeing (and Enforcing) the Family Budget
Keeping on top with the budget weekly or monthly can keep spending in check. Be warned though: budgeting can, however, create conflict.
In my experience, the person managing the family budget can easily step into the role of the spending enforcer. To not create conflict it helps if the family collectively updates the budget or takes turns. Doing so will also create a better family unity and awareness needed to achieve desired financial goals.
Family Budget Essential Tip #3: Savings, Savings, Savings
The most important part of establishing a family budget? Savings.
Sound like a sore subject? You’re not alone.
The Challenge with Savings
A good percentage of American families lack savings. Savings can feel difficult to grow in today’s financial and economic realities. But establishing solid savings remains critically important for both individuals and families.
Why? Credit card debt. Borrowing through credit cards is probably the number one reason home finances fail. Absurdly high credit card interest rates make it impossible to focus on anything besides paying bills month after month.
Once a family is without savings and borrowing from a credit card, it is only a matter of time. Then, the next emergency comes along to put them ever deeper in credit card debt. At some point that financial hole becomes a burden that drains happiness.
Importance of Savings
Savings can prevent a family from turning to their credit cards in times of emergency. Savings can allow for confidence in family decision making. Having extra money saved up allows us the freedom to pursue new jobs or start a home business. Also, savings can also help you make investment decisions and focus on passive income options such as stocks and bonds. (We’ll talk more about investments in an upcoming post!)
In short, having a healthy amount of savings can alleviate a lot of the stress associated with managing the home finances, and it can also bring happiness instead of dread in many of life’s crossroads.
So, tell me, when it comes to establishing a family budget, how’re you doing? Where do you see an opportunity to build more to empower your home finances? Leave a comment in the thread below.