Money management is fun. Said no one ever!
But having – and sticking to – a budget is more important than ever (we’re looking at you, cost of living crisis), if you want to make sure your finances don’t become a source of stress.
And the importance of family budgets cannot be overestimated, when you’ve got to deal with growing expenses.
According to Andrew Dadswell from Moneysmart, “A family budget helps you to manage your money and meet your families’ everyday expenses, handle unexpected bills, and save for the future. It can help you to agree on family financial goals, so you are clear about what you want and when, and have a plan to get there.”
Here are the top tips from financial experts to help you get started with your family budget planning.
Start with tracking your expenses
The first step – and often the hardest – part of planning a family budget is tracking expenses.
“Spending items can include regular expenses and irregular, or one-off expenses,” says Andrew. “Regular expenses you might think about when doing the family budget are your mortgage repayment or rent, utilities, school fees, insurances, transport costs, groceries, other fees and any other debt repayments like credit cards or personal loans. Irregular expenses might include dining out or takeaway, home maintenance, school supplies and uniforms, car repairs, registration fees for activities, entertainment, gifts and medical and dental fees.”
There are plenty of family budget planning apps or tools out there, including the free online Moneysmart planner, which will help you work out where your money is going, and then be able to prioritise needs, wants and savings (not necessarily in that order).
Create a family budget for a month
This is perhaps the most practical timeline to follow, as having to do a budget plan more frequently may cause overwhelm, and leaving it for longer might make it harder to keep track of.
But what if you get paid fortnightly, your mortgage repayments come out on the fortnight you don’t get paid, your car insurance is monthly, your energy bills are quarterly and home and contents insurance is due annually?
The key to managing that is by following a budgeting formula.
Pick a budgeting methodology
“There’s no shortage of budget formulas to help you manage your budget,” says our resident financial guru Effie Zahos.
“A popular option is the 70:20:10 plan. This is where you split 70 per cent of your income for everyday living costs (rent or home loan, transport, clothing, food and utilities), 20 per cent for saving and 10 per cent for splurging.”
You could also try the 50/30/20 formula which splits up your income by a slightly different ratio, depending on what suits your financial situation better.
“Another budget option is the zero-based budget. This is where you assign each dollar you earn,” says Effie. “Effectively, it’s your income earned less your savings and investments plus expenses.”
Use buckets within buckets
“This makes it easier to achieve multiple goals,” says Effie. “Instead of lumping your everyday living expenses into a single bucket, for instance, open multiple buckets (accounts) and give each of them a nickname. You might have one account for school fees, another for household bills and so on.
“If you want to be certain that you have enough cash in your bills bucket then a simple way to do this is to add up all your bills for the year and then divide by 26 (if you are paid fortnightly), 52 (if paid weekly) or 12 (if paid monthly). Then set up an automatic debit so each pay day so this number comes directly out of your salary and into your bill bucket. Once you’ve got funds flowing into this bill bucket you should never miss a bill again.”
Get your kids involved
“Getting children involved in discussing the family budget or even having conversations about money in front of children can be a great way to introduce them to finances and help them start learning early about managing money,” says Andrew. Which is perhaps one of the greatest gifts you can give your child as a parent, to prepare them for ‘adulting’.
“These discussions can centre around the difference between needs and wants and how to make money decisions, like saving up for something they may really want to buy but don’t need – like Taylor Swift tickets,” he says.
Never shop after a drink!
One for the mums and dads – Effie recommends avoiding any online shopping on a Friday night, especially after a glass of red wine. “I know I can justify just about any purchasing decision and after a hard week of work I pretty much convince myself by saying I deserve this,” she says. “The key is to know your triggers and put fixes in place. My fix here is the 24-hour rule … I sleep on any purchasing decision. Chances are after a good night’s sleep, I don’t want it as much. Sometimes I may even need 48 hours.”
Download a price comparison extension when shopping
This one’s a game changer. There are plenty of price comparison websites out there, but a browser extension, like Little Birdie, comes to you.
“If you’re looking at a particular product it will let you know if you can get that item for a cheaper price somewhere else,” says Effie.
Encourage the whole family to reduce expenses
There are ways to work in saving and budgeting into everyday life – from leaning into supermarket discount cards to watching your electricity consumption and subscription hopping (which means having only one streaming subscription at a time, watching everything you want to, then cancelling and moving on to the next one). Give every family member ownership over one thing, so things stay on track.
Keep communicating
Trying to manage finances can become stressful. It’s important to have regular check-ins with your partner and other adults involved in the budget to discuss any roadblocks, pain points and reduce overwhelm. It also helps to keep each other accountable.
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