Managing Household Finances—Useful Tips & Tricks on Family Budgeting
Updated · Mar 04, 2023
Managing your own finances can be difficult and time-consuming. Add a few more people to the mix, and it’s downright scary.
But it’s nothing you can’t overcome with good organization and planning.
And you don’t have to do it alone. In this article, we give you some tips on how to create a budget for your family and actually stick with it.
You’ll learn how to:
- Define your goals
- Calculate your income and expenses
- Create a budget
- Coordinate your spendings with your partner
- Get your family excited about the plan
- Stick to your budget
Read on to find out how to make managing household finances fun and easy.
Define Your Goals
The first step in managing your family finances is to set specific goals.
Why do you want to budget in the first place?
What do you hope to achieve?
You might need to organize your finances for a variety of reasons:
- Save up for a down payment on a house
- Pay off credit card debt
- Save money for a vacation
- Help your children go to college
When setting your goals, be realistic. Don’t try to change your entire financial situation overnight. Start with one goal and work your way up.
Also, be sure to give yourself a deadline. Having a timeline will help you stay motivated.
Calculate Your Income and Expenses
This is perhaps the most important step in creating a family budget. This process can be daunting, but it helps you see where your money is coming from and where it’s going.
Start by calculating your household income. There are a few different ways to do that. You can use pen and paper, a spreadsheet, or a budgeting app.
Whichever method you choose, you’ll need to take into account the income of every household member minus taxes.
The next step in the family finance plan is to determine your monthly expenses.
It’s important to be honest with yourself when tracking your spending. Do you really need to spend that much on dining out, or can you cut back?
Of course, you do need to set some budget for entertainment. The goal is to save money, not to punish yourself.
So, start by writing down the essential expenses: rent, bills, groceries, healthcare expenses, child support. Then, you can plan how to manage the rest of your finances.
Make a Budget
Once you have an idea of your family’s monthly income and expenses, it’s time to create a budget.
There are a few things to keep in mind:
- Note down all of your expenses as they are—rent, bills, groceries, entertainment. Start with your current situation, not your desired one.
- Be realistic. If you’re used to spending $200 a month on groceries, don’t budget for $100. Instead, see if you can optimize your grocery habits by planning your meals ahead. You can also make a list before going to the store and sticking to it.
- Think about what you can cut back on. Separate your expenses into essential and optional and see what you can remove or postpone from the latter.
A good way to check whether your household finance distribution is reasonable is the 50/30/20 rule. Ideally, 50% of your income should go for needs (rent, utilities, food, medicine, etc.).
Another 30% are for wants—this would include purchases which are of non-essential importance (or at least not urgent). In this category, you’d put entertainment, clothes, dining out, cosmetic products, and so on.
Last but not least, you should be able to set aside 20% of your earnings.
Usually, the category that needs revising is the “wants.” See what you can cut back on there and put the rest in savings.
The first month of your household budgeting will be an adjustment period. Track where every penny goes to get a realistic picture of your spending. Then, you might need to go back to your budget plan and make some changes.
Coordinate Your Spendings
When it comes to household finances, it's important to coordinate your spending with your family members.
Discussing and planning a budget together is a great way to ensure everyone is on the same page. Plus, if you’re working toward the same goals, you can motivate each other when things get tough.
Another trick that can help you manage your family’s finances is to open a joint bank account with your significant other. This can be a great way for couples to manage their finances together and improve communication within the family.
When both parties have access to the account, it will be easier to track expenses and make decisions about money matters.
There are a few things to consider before opening a joint account, though.
First, make sure you are comfortable sharing your financial information with your partner. Second, note that both parties are responsible for the transactions on the account. This means that if one person racks up overdraft fees, the other is also liable.
That said, once you decide how to organize your bills, groceries, and other household expenses, a joint bank account can be of huge help. It provides a sense of transparency and accountability and makes budgeting easier.
Get Everyone Involved
When it comes to managing household finances, getting all family members involved is essential. It can even be a fun way to bond with your loved ones and learn about budgeting together.
Here are a few ideas to get you started:
- Create a budget together
This is a great way for everyone to see where the family's money is going. Together, you can identify more areas where you can cut back. You all should have a voice when deciding how to build a budget.
- Make a list of affordable family activities
There are many fun things families can do together without spending a fortune. Taking walks, going for bike rides, playing games, and having picnics are all great options. You can also get creative and come up with your own ideas.
- Talk about money matters openly and honestly
This is an important step in working together as a family to achieve your goals. It's essential that everyone feels comfortable talking about money and sharing their ideas. It will help create a more cohesive financial plan.
- Establish rules and guidelines for spending
It's important to have a set of rules for following your money management strategies. This will help you stick to the plan and ensure there are no conflicts.
- Make a plan for saving money
Saving money as a family can be difficult, but it's not impossible. Come up with a plan that works for everyone and make sure to stick to it. You can have different savings goals for each family member, or you can work together to save up for a larger goal.
- Make a game out of it
You can create contests and see who’ll come up with the most creative, low-cost entertainment idea. Or, you can think of ways to earn money from your hobbies together.
Perhaps one of you is good at cooking or DIY crafts.
The others can help them set up a YouTube channel or a platform to sell their products.
Stick To Your Budget
This can be the hardest part of managing your household finances. But if you want to get your spending under control, you should stick to your budget.
It can be difficult, especially if temptation strikes. But with a bit of willpower and some creativity, you can make it work.
Here are a few tips for sticking to your budget:
- Revise your spending plan regularly. This will maintain your motivation and keep your goals in sight. Plus, you might need to adjust your budget if your income or expenses change.
- Use cash. If you only bring the money you’ve planned to spend with you, it’s harder to go over budget.
- Track your spending. If you’re writing down your expenses, you’re less likely to overspend. Money management tools are a great way to monitor where your money is going.
- Get creative with entertainment. Instead of going out to dinner or the movies, you can have a movie night at home.
- Get help if you need it. If you're struggling to manage your family finances on your own, don't be afraid to seek out a financial advisor or a credit counseling service. That way, you can get expert advice and get your budget back on track.
When it comes to managing household finances, getting all family members involved is essential. It can be a fun way to bond with your loved ones and learn more about finance together.
Everyone in the household should have a voice in the family budget, so make sure to get them on board.
With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.