“How to properly manage a family budget?” – the question isn’t correct. Each family has its own rules, and the views of different people on this topic may differ. Someone forms a joint piggy bank, someone supports the idea of separate finances. The only constant is the desire to avoid money problems and live in comfort. Here’s how to do it.
First, decide on a budgeting model. These options are available:
- Shared Budget. All family members send their income to a common piggy bank, and everyone spends it too.
- Separate budgeting. “I earned, I spent.” The difficulty is in achieving common family goals. It’s also difficult to assess the situation when money is needed urgently because family members have no information about each other’s available resources and capabilities.
- Mixed budget. Each family member divides their income into two parts – common and personal. Joint savings take place, but you have funds, for example, paying for gambling at BetAmo, going on a vacation, and so on.
One leader, dual power, or anarchy? If each family member has his or her own budget, he or she will be responsible for items of expense and income. And if the piggy bank is shared:
- Decide at the shore how financial decisions will be made so that you don’t drag the blanket and, conversely, don’t take responsibility away – there’s a question of trust that’s important here. You’ve probably heard stories of spouses tightly controlling finances with receipts and detailed justifications for purchases. If you catch yourself thinking that a member of your family is spending money “inappropriately,” discuss the problem right away.
- Every family member who has the ability to manage finances should be knowledgeable about financial planning. The more ideas you get about optimizing spending, the better.
- It’s not a good idea to dump money into a “pool” and pull from it who needs how much. If you’ve taken on a budget, don’t forget that the process consists not only of depositing funds but also of monitoring actions and your financial situation.
When you’ve already decided on a budgeting model and the allocation of responsibility for funds, it’s time to think about specific actions to save the family money.
It’s a good idea to start by keeping track of funds to see what you have to work with. The most conservative way is to write down income and expenses on paper. You can also use Excel spreadsheets or themed smartphone apps.
Expenses should be broken down into categories: mandatory and non-mandatory – mortgage, rent, children’s education; mandatory and negligible – groceries, gasoline; optional – entertainment, leisure, and so on. So you will understand what you can save on, and how much you will have to pay every month.
Income can also be divided into similar categories, especially if your income is partly fixed and partly comes in the form of bonuses and bonuses. So you’ll see that, for example, this month you were able to afford a lot of money on account of the advance, but then you can’t count on it.
Plan for expenses. Based on your financial situation, calculate how much money you are willing to allocate for occasional expenses. It is important to adjust at the beginning of each month – it is not reasonable to constantly lay down the amount “for the theater,” “for the museum,” if you’re not sure that every month you will visit these places.
Plan in advance for occasional expenses. For example, don’t forget about the birthdays of loved ones and other holidays to allocate funds for gifts. Planning for such spending at the beginning of each month will help keep you out of the piggy bank of deferred savings.
Optimize spending. It’s not enough to plan how much you’ll spend on your needs and wants – you need to allocate it wisely, tailoring it to your family’s capabilities. After a few months of monitoring your finances, you’ll be able to analyze your expenses and figure out what you’d rather not save on and what you can afford not to spend on.
Save wisely. An excessive desire for benefits can sometimes lead to higher expenses. For example, buying a low-quality item will force you to spend first on it, and then on the purchase of a new high-quality and more expensive product.
Make a financial plan, if you have children, involve them in the discussion. Coping with the financial burden will be easier if you stick to a plan made for several months, six months, or a year in advance. That way the funds for the long-awaited vacation will remain in full, rather than being partially squandered on shopping and entertainment.
What to pay attention to. Children can be taught financial literacy from an early age – there are even cartoons for this. This will allow your child to have a more rational approach to money when they grow up, as well as an assessment of your family’s financial situation and capabilities.
Like any issue of life together, finances can and should be discussed. Do you have enough money, what new needs do you need to invest for, why do you think it’s irrational to spend money on certain things?
These conversations can be held during the financial planning for the next period. Share the risks together. If you earn substantially different amounts of money, talk about each member’s contribution to the joint budget so that everyone is comfortable.