The key to mastering the art of family finance is to first create a monthly budget using collected data from the previous month- What did your family spend on housing, utilities, water, gas, groceries and personal care? Once you’ve established and recorded what’s being spent on fixed monthly expenses and daily purchases, it becomes easy to identify areas where spending can be refined.
- Categorize expenses: When creating a family budget, it’s important to categorize monthly expenses. For example, your housing category shouldn’t be limited to just a rent or mortgage payment. All expenses related to the property should be included in the housing category including utilities, gas, water, insurance, electricity and any applicable taxes. The same concept applies for transportation- the expense related to owning a vehicle is not limited to just the car payment. Maintenace, gas and insurance should be included in your transportation category. Another category to consider is food spending. Food spending is best split into two categories: groceries and eating out. Albeit nothing wrong with fine dining from time to time; excessive eating out will increase food spending substantially. It’s important to split and categorize so you’re aware of where you’re spending money and why.
- Utilize a budget planner: Using a budget planner allows you to see your monthly fixed expenses before the month starts and enables you to plan spending to meet your financial goals for the month. Most budget planners include a daily expense tracker where you can log your daily purchases. I encourage this, especially when initially starting best budgeting practice because it makes identifying categories where spending can be refined more apparent. After you’re fluent- it’s super easy to digitally automate the entire process.
- Review and revise frequently: Set aside time to review your total budget at least once a month. I have greater success reviewing my spending on a weekly or biweekly basis. This is partly because we have a large family- someone always needs something, so I review our budget more frequently to ensure I’m not overspending on our daily purchases- hello Target run!
- List shopping: Having an idea of what you need prior to shopping is critical to preventing overspending. I utilize the notes section in my iPhone to manage my shopping lists effectively. I list whatever items my family needs and go shopping only after I’ve done a quick budget review. This ensures I’m working within the budget I created for the month, and everybody gets what they need.
- Automate everything: Bill paying is not the only system that should be automated. Set up your checking account in a way that enables your planned savings and investments to withdraw on an automated schedule. Depending on your pay frequency- calculate the amount of cash per pay period you will need to put aside to reach your annual financial goals- How much money do you want to have saved? What percentage of your income are you planning to invest? Are you saving independently for retirement or maxing out an IRA account for the year? Whatever your family’s financial goals are, set yourself up for success by automating the process. Set aside the amount of cash per pay period you need to reach your annual financial goals and have the money automatically withdrawn on an automated schedule.
- Consume content that supports financial literacy: I’ve listed a few of our family favorite read aloud (or independently) books that support financial literacy as well as our favorite Instagram accounts and included a free PDF to get you started on your budget planning journey and mastering the art of family finance.
Love, Daley.