If you’ve ever looked at your bank account and wondered where all the money from your paycheck went, you are not the only one! Many of us don't realise how much we spend or really pay attention to what we spend it on.
There is a dizzying array of budgeting options and budgeting advice out there. It’s easy to become confused, or even overwhelmed by trying to work out which budgeting technique or principle suits you best. To cut through the noise, we’ve collected some of our simplest, easiest ways to budget for families.
Setting up a family budget takes time and careful planning, but it's completely doable if you follow a few important steps. Put quite simply: the best budget for your family is the one that works best for you. Plain and simple. The most effective budget is one that is constructed taking your individual family circumstances into consideration.
Without getting lost in all the different names for budgets, here are some easy to apply principles to simplify your family’s budgeting.
Match your budget cycle to your pay cycle
Do you get paid weekly, fortnightly, or monthly? Whichever one it is, that's what your budget cycle should be too. Having a monthly budget when you get paid weekly, or vice-versa can create unnecessary frustrations. So match your budget to your pay cycle.
Calculate your income
Now calculate how income your family is earning each month. If you have regular paychecks this should be quite simple, but if you have a side-business, or your own business or work as a contractor the income may fluctuate. Take an average of your last 3 months of income if so, or slightly below average if you want to be cautious.
Track your spending
Using old old bank statements, receipts, and budget apps, assess your family's actual spending over the last few weeks. Use anywhere from 1 -3 months as a timeframe for an accurate reference. Write down everything that you and your family have spent, and then categorise it.
How much do you spend on groceries every week? How much do you spend on eating out, or entertainment? Do you pay childcare? How much do you spend on car maintenance, or public transport? Do your kids get regular pocket money?
For the best chance of your budget working make sure you are totally honest with yourself about where your money goes every month.
Set realistic budgeting goals
This is the fun part! According to some of Australia's banks, a decent rule of thumb to follow is to allocate approximately 60% of your household’s after-tax income to covering the basic necessities for our family, such as your food, housing, transport and bills. Some households end up spending around 70% on these essentials, and if that's where you’re starting from then that is ok.
If your grocery bill is especially high, perhaps consider looking at purchasing home brand goods, reducing meat intake or buying your veggies frozen as a way to cut down costs. Adding your own toppings to frozen pizza bases for family pizza nights can be way more fun than ordering take out!
Divide the remaining 30-40% of after-tax income between:
a) Savings,
b) Paying down debt, and
c) Fun family activities
Set financial goals as a family
A great motivation to budget is to have a goal you’re working towards. Whether you’re wanting to buy a new family home, a new car, or take the kids on holiday; having goals is a great motivation! If it’s a family holiday you can get your kids involved. Let them feel included in the budgeting process.
Take advantage of free events in your city
Australia is an amazing country for free events such as markets, fairs, displays, performances. Check online to take advantage of these; it will reduce your entertainment expenses significantly!
There are many ways for families to find a budget that works. From setting monthly spending limits, to buying more frozen foods, and taking advantage of free entertainment around your city, there are many ways that families can still enjoy life whilst on a budget!
