Try to remember the time when you got your first paycheck. Chances are that it didn’t come with a set of instructions on how to best manage it or where to park it or what to do with it. And we’re left to figure it out on our own.
Let’s assume that for the first few years after entering the working world, we somehow managed to manage our money decently without any huge setbacks. But one day, out of the blue, you decided to slide a ring onto the finger of your significant other and just two blinks later, you find out that you’re about to welcome your little human into this world.
What now? You’ve experienced first-hand how many things there is to learn about managing finances and you know that you’re nowhere close to being prepared. With that, here are 5 tips on how to properly and safely manage your family budget.
1. Set goals
Before even thinking about how to plan it out, you need to figure out what is important to you. This will answer why you’re doing what you’re doing and will be the anchor point when things get tough. For example, you might want your family to live without worrying about money or have enough in the bank that you can take a vacation to Iceland.
When setting goals, less is more. You don’t want to complicate things. Knowing what you want out of saving money will allow you to design your plans easily.
This plan will then consist of how much you need to save and a time frame to go along with it. Using this, go from top to the bottom and think about how you’ll achieve this. Be realistic when doing it. You can always gradually increase your ambitions later.
2. Calculate average income and expenses
Reaction to expenses
This part is entirely about the flow of cash. Just like running a business or a country, you have to know how much is coming in and out. Include as many details as you can: wages (net), commissions, side hustles, government benefits, investments, etc. And not to forget the expenses: groceries, emergency fund, debt payments, etc.
It could be quite a chore at the beginning, especially with the little payment such as parking tickets or the Mentos from 7-eleven, but tracking your money grants you another level of awareness that you didn’t have before. And with that awareness, comes the ability to make positive adjustments.
3. Analyse spending
You may realise when you track your cash flow that there could be quite a lot of ‘wants’ instead of ‘needs’. If that is the case, you’d probably want to learn a few techniques to combat impulse spending as the opposite case is having your money slowly leaking out.
Related: 6 Ways To Stop Impulse Shopping
The key to good money management is to know whether something is a need or a want. If you aren’t sure, try to live without it for a period of time. But to be entirely truthful, almost everything you buy has an element of a need and a want, the question is whether or not it will help you reach your goals.
4. Revisit the original budget
After a month or two, you’ll have a much clearer picture of your finances. And that includes the areas that need adjusting. We live lives that are constantly changing and therefore, no plan or budget can stay the same forever. It may be a slight difference from when you first did the estimation or it may be that you’ve since gotten a raise.
The notion is to have periodic reviews to always be on top of your finances and improve the efficiency of your plan. Take into account the seasonal expenses as well so that it doesn’t come as a surprise to your plan. Ultimately, it will help you avoid the stress of debt and give you the room to make tiny mistakes.
Related: 7 Budgeting Management Apps That Can Help You Track Your Expenses For Free
5. Stay committed
As you become more and more in the habit of managing your family’s budget effectively, the plan will feel more natural and become a way of life in your household. Some of the planning or budgeting may even feel easier after a period of time.
Stay committed to the goal that initially got you started with the entire process. After all, the goal is only as good if it is realised. Life happens, don’t take it way too strictly and cut out every kind of entertainment.
But having a solid foundation of how to better manage your money as a family allows you to come out ahead rather than in debt. Who knows, you might even be able to afford your dream home just because of this!