226-378-7748 joe@budgetboss.ca

Tuesday, February 20, 2018

Budget Essentials for Your Household

When you don’t have kids, tightening your belt is easy. We all remember the Mr. Noodle days. Throw in a can of corn and you have a meal. With kids, it’s a little trickier. These days, feeding them Kraft Dinner every night might get child services called on you. Besides, we all want healthy and happy families. With the cost of everything going through the roof, how do you stay in the black every month? Setting up and maintaining a family budget is essential to success. Those lovable cute faces are really money gobbling vultures in disguise. Strict family budgeting is key to success. Our first instincts are to give our children everything we didn’t have. That might lead you to the poor house. Today, I am going to give you my budget essentials for your family. Getting a hold of this early is best, but it is never too late to start organizing your family cash flow.

Know your income

Seems simple right? Then why is it that almost half of the people I meet do not know what comes in every month? Knowing exactly how much you make is the easiest step to budgeting. A natural instinct of ours is to overestimate our income and underestimate our expenses. What this has lead to is a nation full of people in debt. The reverse should be done. If you underestimate your income and overestimate your expenses, the only outcome will be more money in your pocket. Knowing your income is very, very simple. We all get pay stubs and we all have a bank account. See the final amount, after taxes, that goes into your account every pay. Make sure it is the net amount, tax money is not your money. If you have varying amounts each pay, go back in time and find the average. This can be done using your online banking or adding all your pay stubs together and dividing by the number of pays. This is literally the easiest and most important part of any budget, so answering the question, “What do you make,” should take about 3 seconds to answer.

Know and track expenses

Just like your income, you must know what is coming out every month. This is the part that takes a bit more work. With a family, this can be extensive. If you have online banking, print out the last few months and find the constants. Certain expenses are regular, like housing, utilities, transportation, and food. Other expenses are the ones that can really add up and send you to the poorhouse. Things like restaurants, memberships, alcohol, shopping trips, and even the morning coffee can deplete your bank account quick. If it takes you highlighting every expense, do it. You will find that even the non-essential expenses will become regular and add up over the course of the month. When you add up the expenses that come out every month and then subtract it from the total amount of money you made, what number do you get? Is it a negative number? No matter what number it is, it will tell you something. You either spend too much, make too little, save too little, or all three.

How to Create a Family Budget, Step By Step – Mint

Use tools

There is an abundance of budgeting tools out there. You can literally sync your bank account with your phone and have it alert you when you are getting close to over budget. Some people need this sort of assistance. For others, like myself, a simple excel spreadsheet will do. You cannot mentally track all your monthly expenses, it is just too overwhelming. Using the right tools will help you gain the transparency you will need to get your money in order. Back in the day, family budgets were as simple as a pen and a piece of paper. Today, all the guesswork is taken out of budgeting so there is no excuse for not knowing where your money is going.

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Set Limits

Now that you know where all your money is going, it is important to have a family discussion about setting budget limits on discretionary spending. This gets a little tougher when your children are older if they have become accustomed to a certain level of spending. The good thing about that is they are old enough to work if they are old enough to bitch about less spending. If you are in the red every month, something must go. Whether it is the family dinners at the Keg every week, or movie night at the Cineplex. Either way, there are many cheap alternatives to expensive family fun. Setting spending limits will have an immediate effect on your bank account. It will also help you to raise realistic and respectful children. We must remember that acting our wage is just as important as acting our age. Your children should know about both.

Debt

If you are in debt, reducing spending to pay it off should be job number one. Household debt is crippling to your family budget. Interest payments will destroy your monthly cash flow. That is less money for your family to spend on everyday things like food and even the fun things like family outings. If you are in debt, your family should focus on paying it back immediately. This may require an open and frank conversation with your children about the perils of debt and why the spending will have to be curtailed until it is paid off. Remember that you are the adult and only you have the power for things to change when it comes to the family finances.

The Effects of Debt on Families – LiveStrong

Work your kids

In my opinion, families with kids shouldn’t have maids. Why would you pay for someone to clean your house, or mow your lawn, or shovel the driveway when you have access to free labor every day? Kids are literally your work slaves until they leave your house. When they are young, instill in them right away that they need to work for everything they get in life. Giving your kids an allowance based on these chores is a good way to show them the value of a day’s work. No work, no money. It is that simple. When I became a teenager, if I wanted any clothing that wasn’t Zeller’s brand garbage, I had to get it myself. Needless to say, I started working at an early age. When your children are young, no one cares what they wear. When they become old enough for their friends to care, they are now old enough to work. Once a kid hits 15, the only items they should get from their parents are birthday gifts and food. Everything else is excessive. You have given them enough already.

The Top Money Mistakes Couples Make – Budget Boss

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Communicate

While you are working on your family finances, and moving forward after that, you need to communicate constantly. Talk with your spouse about what you spend your money on. Talk with your kids about priorities and the difference between a want and a need. Talk with your maid about how she is not needed anymore. Communication during this process will help you work through the tough parts. When everything is out in the open, there will be no surprises. Surprises and secrets kill any budget. Communication will build stronger relationships and overall your family finances will improve.

Here is a list of essential financial traits every family needs to be successful.

  • Positive monthly cashflow
  • Control of discretionary spending
  • Debt reduction
  • Emergency savings
  • Adequate insurance
  • Long term investing

If all these boxes are checked off, your household will run itself. You can start with the positive monthly cashflow and work from there. With the cost of raising a child constantly growing, getting a hold of your expenses is not only important, it is essential to the success of your family. The goal should not be just to get the kids to adulthood, it should be to get there successfully with your goals and dreams still in reach.

 

Thanks for tuning in today as we begin Family Week at Budget Boss. Don’t forget to tune in tomorrow as I discuss the top items new parents waste their money on. If you would like help implementing a family budget, please do not hesitate to contact me at joe@budgetboss.ca. Have a great day Bosses!

“Let our advance worrying become advance thinking and planning.” – Winston Churchill
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Email – joe@budgetboss.ca 

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