Remember the days when efficient budgeting meant making sure you had enough cash in the bank to cover a good night out on a Saturday? Once you have a family to think about, that seems like a lifetime ago. Suddenly, you are juggling the needs and wants of every family member.
Differentiating those two categories – that is, the “needs” from the “wants” and knowing when you are crossing the line from treats to recklessness is one of the reasons a family budget makes so much sense. It means you can take care of everyone’s needs, do the responsible thing and set aside a little each month into savings accounts or Junior ISAs for the kids, and as for what’s left – well, that’s where the fun starts. It sounds great in theory, but you’ll need to follow some basic rules to make it work.
Define your goal
Remember that line from Alice in Wonderland? To paraphrase, the Cheshire Cat told Alice that if she doesn’t know where she wants to end up, it really doesn’t matter what direction she walks in.
It’s a lesson that pops up time and again in life, and it certainly applies to budgeting. What are you aiming to achieve? Do you want to save up money for a family holiday or a deposit on a bigger house? Or perhaps your main aim is simply to make sure you are still in the black at the end of the month.
Understand your starting point
Almost as popular as the sage advice of the Cheshire Cat is the old joke set in the location of your favourite stereotype, in which someone asks for directions and is told by a local “I wouldn’t start from here.”
Again, it sounds silly, but there’s a serious point to be made. If you are not 100 percent clear on your starting point, you’ll struggle to reach your destination. Take an in depth look at your income and expenses to see how things stand at the moment. Then, start tracking your expenses to understand exactly where your money is being spent.
Start cutting the expenses
Whatever your ultimate goal might be, reducing your expenses is going to be key to getting there. Once you start keeping track, you will immediately see some areas where you can economise. In fact, you will probably be quite horrified by just how much you spend on seemingly insignificant things. For example, those quick coffees on the go as you pop into town can really mount up.
Make sure it’s a team effort
Family budgeting means just that. It’s no use you going through the above steps on your own and depriving yourself of your favourite caramel latte if nobody else makes an effort. Sit the whole family down around the table, go through all the above steps together and make sure everyone has an opportunity to contribute to your family budgeting plan. That way, they are more likely to stick to it, and ultimately, you will all get to share in the rewards, too!