Five Ways to Get Your Budget Back on Track
With all the demands of running a family, it’s hard to find time to make a household budget. A budget ensures you can maintain financial stability and security as you raise your family. This is where family and budget management apps like Famtastic help you manage your budget. By managing your budget goals and then tracking your expenses by category, you can see where and when you are spending most and manage the budget as a family.
What you do with the amount of money you make is more important than how much you make. Proper money management is not a complicated formula, it is comprised of prioritizing important finances before personal expenses.
Building a simple budget is a step-by-step process. Your budget should give you a clear picture and a solid foundation to manage your current income and expenses and plans for the future.
Here are five tips to manage your household budget:
Set SMART financial goals
Start by making your financial goals “SMART” goals. SMART is an acronym for Specific, Measurable, Attainable, Realistic, and Time-related. In other words, financial goals should have a definite outcome and time and within your financial reach.
Setting financial goals is an important step in protecting your family’s future. Find out your short-term financial goals and long-term financial goals. Then divide the goals as necessities and luxuries. Then, you can prioritize your financial goals accordingly.
Financial goal examples:
- Save money for your child’s college fund
- Savings for your retirement
- Buy a vacation home or second house
Financial SMART goal examples:
- Save $50 per month for the next five years to reach $3,000 towards my child’s college funds.
- Save $100 per month for the next ten years to save for retirement.
Calculate Your Income and Expenses
Bring everything to the table such as earnings statements, receipts, bills, and bank statements. First, separate them into two categories for incoming and outgoing. Andy Hough with money.usnews.com said, “You need to compare your total expenses to your total income. Sometimes, the incoming amount might be smaller than the outgoing, but a budget will help you control that.”
Create Categories for your main spending
Now, Categorize your expenses/outgoing money. Typically, it is housing, transportation, and food that take up most of a family budget. But there are other few recommended Budgeting Categories. Consider including these categories when you create your own budget. For a comprehensive list of budget categories, refer to Local First Bank’s Personal Budget Categories.
Since you have a clear picture of where your money is going, find the category that needs more attention after you’ve got a grand total of earnings and spendings. Normally you’ll want to tackle your debts first.
Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts. But some credit cards have zero interest rate in the first year of use. Make a list of credit card statements, loans, and mortgages and prioritize and rank them in the order you want to pay them off.
- Create a monthly bill payment calendar
- Make at least the minimum payment
- Pay your bills on time each month
Break expenses into two categories: fixed and variable
Fixed expenses cost the same amount each month. These bills cannot easily be changed and are required parts of your way of living. These include expenses such as rent, insurance, phone bill, internet, and utilities.
Variable expenses are the ones that you can control. It varies from month to month and includes items such as groceries, gasoline, entertainment, dining, and gifts. These expenses are usually people try to cut when they need to start saving money.
Learn more about variable cost and fixed cost from The Balance’s article “What’s the Difference Between Fixed & Variable Expenses”.
Cutting down variable expenses is more difficult than we think. Deciding not to buy a more expensive dress, for example, is a one-time decision that is much easier to make than controlling the budget to trim the grocery bill — and then sticking to it every month. Some “fixed” expenses such as a Netflix, Hulu, or Amazon Prime subscriptions can be canceled if you need to save some money and find that these services are eating up your budget every month.