Establishing a family budget is critical to your financial health as a family. The fun part of a family budget is getting everyone involved in the process and teaching each person in the family about the responsibility of managing the money they use.
Having said that, however, it is not easy to have a family budget. There many unknowns when children come into the family and it can be hard to budget but it is also not impossible. In fact, having a budget will help you handle all those expenses that arise and when you do have children you will not feel like your hands are tied when unexpected expenses come up.
Below are some tips for creating a useful family budget.
Family Budget - Tips
When you think about establishing a family budget, consider the ages of your children. If you have very young children, they most likely will not be part of the budget planning process, but they will tax your budget. Make sure you account for clothing, diapers and formula. If your children are older, think about how they can help the family develop and stay on budget.
Do you give your children an allowance? Consider that when you develop your family budget. Use their allowance as an opportunity to teach them the principles of tithing. Some families ask children to donate a percentage of their allowance to charity. Have them save at least 10% percent of the allowance after paying tithes and encourage them to save even more. Be sure to provide them a bank or a jar to put the money in and help motivate them to save for an item or toy that they really want. The important part is to think about how you want your children to handle their allowance and develop some teachable moments around the important principles of money management.
Do your children play sports, dance or do other activities? How often must you pay for these activities? Those that require monthly payments are the easiest to keep up on, but the activities that you only pay every 8 weeks or so are tricky. You must think ahead, and budget money for the baseball season coming up, the dance recital costume that needs to be purchased and the new cleats for soccer. Be sure to budget these items in wherever possible.
Once you have an idea of what you must budget, think about the kind of family budget you want to have. Many families use the envelope method and it works something like this:
You determine what your expenses are in a variety of categories. On payday, you create envelopes for each category. This will not include bills to pay (such as credit cards, phone and utilities) but will include expenses like groceries, gas, gifts and other purchases you would normally use the debit card on.
On payday separate the predetermined amounts of cash into the various envelopes and work with that cash only. You do not use your debit card or credit cards. When the grocery cash is gone, it is gone until the next payday.
There are many advantages to the envelope method:
It is easy to see how much money you have left in each fund to spend (and you do not need a computer to see it).
You can hand the envelope to anyone else in the family and they understand that the cash in the envelope is all there is to spend for that expense. It is harder to overspend when you are using cash exclusively.
You can easily move money from one fund to another if your original estimates are off. For example, you might fund the grocery envelope with $500 for the month of groceries, but know mid-month that you will not need all that money. But maybe you are driving a lot that month and need more money in the gas fund. You can take some cash from the grocery fund and move it into the gas envelope.
The envelope system will not work for every family budget. Some families use a simple white board that they refer to often. The white board might include information about:
- Bills to pay
- Current debt
- Expenses that are upcoming
- Allowance balances
Of course, not all parents will be comfortable sharing this information, but even if you are in debt and trying to climb out this can be a valuable lesson for your children. If you are not comfortable sharing this information, you can limit the family budget discussions to how to spend and save money and leave out your own debt challenges. It is important not to let your financial worries pass to your children so use the information as a lesson in how to appropriately handle money instead of basing it on what not to do.
Once you have established a family budget that works for your family, it is time to stick with it. Encourage older children to set a budget with their personal earnings, and work with the younger ones on the basics like tithing and saving. You will not teach your children anything if you create a budget that does not work. The most important aspect of the family budget is creating a spending and saving plan that works for everyone, and that is realistic.