Having a family is one of the most rewarding and fulfilling things we have in our lives.
But that doesn’t mean if we have a family then we have everything set and we won’t ever have any challenges in our life.
As your family starts to grow so does your list of bills and expenses. It can be shocking how quickly little purchases can distract us from the goals we have for our family.
If you aren’t careful, you can quickly fall down the hill of the financial slippery slope.
Here is a plan that will help you get your family finances back on track in just four months’ time.
Month 1 – Get your family on-board
Before you even start to look at your budget you need to have a conversation with everyone in your family. It doesn’t matter how old they are, get them involved.
You need to make it clear that your spending habits are going to change but don’t forget to explain why you are going to be making these changes. Don’t forget to explain how these changes are going to help your family.
Instead of sending your family into financial shock take this first month to ease your family into a new habit of spending. Go through your bank statement for the last month and make a list of all the “extras” you spent money on. Pick two of your biggest financial habits (eating out for example) and take this month to cut back a little bit.
Month 2 – Set the budget
This is when you are going to figure out all of your expenses and compare those numbers to your income. Are you overspending? Are you cutting it a little too close for comfort each month? Are you able to set some money aside for emergencies? These are all questions that you need to answer when getting your budget set up.
Follow these simple tips while preparing a family budget:
List all the commodities and services needed by the family members throughout the budget period: All the expenditure of the family for a particular period should be written under a variety of budget heading. Omission of any items of expenditure during this period makes the budget a failure.
Estimate the costs of the desired items: After listing the items of expenditure it is necessary to estimate the cost of each item as accurately as possible. The total costs of all the desired items should be estimated so that it will become easier to make a balance between the total income and the total expenditure of the family.
Locate Fixed and Variable Expenses: Your family budget might include Utilities (electric, water, etc.), Secured Debts (mortgage), Unsecured Debts (credit cards), and Discretionary Spending (lunch, clothing, etc.).
Control Discretionary Spending: A tried and true way to manage discretionary spending is the envelope method. The money you allocate for everyday expenses goes into an envelope each month.
Be accountable for every dollar your family is spending.
Month 3 - Cut your spending and establish new habits
You now have a custom budget set up for your family finances and have had a chat with your family about how some changes need to be made. Now is the time when you convert all of this talk into action.
Make it your family’s goal to stick to the budget you just set! Evaluate where you stand at the end of each week. See how you guys are doing at keeping to your financial goals. If you have fallen off a little bit, get back up and try again.
Month 4– Review and make adjustments to your budget to make it more realistic.
Evaluate your budget, as it will help in revealing the hidden problems in your spending, known as budget leaks. This financial check-up will help you optimize your budget over time.
Use the S.M.A.R.T. acronym to test and adjust your goals:
Specific—State your goal in a few well-chosen words. “We want to purchase a car by the end of this year”.
Measurable—How will you know you’ve achieved your goal? “How much will it cost?”
Achievable—It must be something you can accomplish financially given your means. “Can we save that much given our current and predicted future income?”
Realistic—Even if achievable, does it make sense in your situation? “What will we have to give up and is that OK?”
Time-based—Your timeline will tell you whether this is a short, medium, or long-term goal. “How long will this take?”
Remember it’s not going to be easy, but you are going to be so happy that you made these changes! Your entire home will become a happier and calm sanctuary for your family.
Throughout this entire process of getting your family finances back on track, remember to keep positive at the forefront. Why are you cutting back? Are you getting rid of your debt? Are you saving for a family trip? It would be a good idea to write down your end goal, frame it, and put it up somewhere in your house. It will be a great way to keep your eye on the prize!
In the meantime, here are a few more articles that can help you live pretty for just pennies: