For many families, being able to save significant sums of money may seem like a luxury. Between rising living costs and stagnant wages, it is no wonder that families across the country are having trouble successfully budgeting their resources and saving for the future.
In spite of these realities, there are several ways that your family can learn to adapt to the current economic climate and create a budget that meets all of your family’s needs. Once you have created your first family budget taking into account everyone’s earnings and spending, you can start looking for ways to cut costs and save more.
If you look closely at your household costs, there are probably a few different ways you could save significant amounts of money on your annual bills for heating and cooling, water usage, electricity and more. Even newly married couples should examine their finances and create a functional budget that works towards both spouses’ goals. Families that already have children are probably concerned about how they can pay for their children’s future college costs, something any parent can start saving for now. Read on to discover more information about good money management and budgeting skills for families.
Creating a Family Budget
The first step towards good money management is to create a functional family budget. If this feels like an overwhelming task, you can begin to figure out your budget by laying out how much money each person earns and spends or how much the family collectively earns and spends for different categories of expenses. If it is not already obvious, a good way to get an idea of how much you spend is to track your spending for about a month. There are many different ways you can do this, including looking at your spending history instead or tracking your current spending with a notebook or app. Once you get a picture of your spending habits, you can successfully craft a working budget for you and your family that allots enough money for all the necessities and still puts a little away for savings and other investments.
The other important aspect of creating a family budget is making sure that the budget you create reflects your spending priorities as much as your income limits. If you haven’t already, you’ll want to create a budget when you already know what your spending priorities are. For example, if after looking through your spending habits you realize that you have been spending more than $150 a month on digital TV subscriptions but only $50 a month on the organic vegetables you love, you’ll want to think about whether your TV is really worth double the resources as your healthy food. In the new budget you are creating, you can decide to start spending the more equitable amount of $100 on TV and $100 on vegetables, switch vegetables to the bigger budget category or cut down on TV costs altogether to reflect your opinion that nutritious food is more important than hundreds of unwatched TV channels. No matter what your income is or priorities are, good money management begins with creating a realistic family budget that incorporates both spending history and spending goals.
Saving on Family Household Costs
Once you have figured out how much your family is earning and how much you are spending, it is time to look for ways to start cutting costs and saving money. Luckily, there are several ways that you can save money, starting by reducing your household costs. While your monthly rent or mortgage may be a fixed cost, many of the others bills associated with your home can be reduced or even eliminated with some clever maneuvering, shavings tens if not hundreds of dollars off of your monthly household costs. Some strategies for saving on family household costs may require participation of the whole family but others can be done as a one-time fix that saves you money in continuation.
For example, an easy way most families can save on household costs is to re-examine their cable, news, TV and movie subscriptions. Many families will find that they are paying hundreds of dollars for access to channels and entertainment they have never used and never plan to use. If you do not use a subscription more than a couple times a month, consider reducing it or getting rid of it altogether. The same goes for your online subscriptions to any news sites or movie channels that may be eating upwards of $100 of your money annually. Looking into your subscriptions is just one of the many ways you can save on your household costs. Investing in surge protectors and environmentally-friendly light bulbs can cut your average energy usage significantly as well. Saving water, taking advantage of naturally shady areas and sealing drafty windows can also make the difference between a successful budget and one that falls short.
Money and Marriage
Newly married couples face unique financial challenges when combining their resources and coming up with a new budget for two people, not just one. New spouses must think about the possibilities of double the credit card or education debt, healthcare costs, transportation costs and more. If a child is in the picture, the budget can get even more complicated. Spouses who are struggling with creating a functional budget for their new life together should consider incorporating a few helpful financial tips into their budgeting efforts.
To begin, new spouses should establish an open discourse about money, expenses and financial responsibility. Although this type of conversation can be uncomfortable for many couples, it is essential to having a successful financial relationship with your partner. Along the same lines, you and your partner should agree on working towards the same financial goals and which finances you want to combine and which you would prefer to keep separate. This step may involve some outside counsel if you and your partner have complicated assets.
Once in agreement, you will want to start considering how to pay down debt, create a robust emergency savings fund, pay for big upcoming expenses and plan for your retirement with you and your spouse’s current and projected income. When you and your spouse are on the same financial page, you can begin crunching the numbers to come up with a budget that you both can commit to.
How to Save for College
Families that include children are often worried about how they will pay for their children’s eventual university costs. Given that the cost of attending both public and private schools could double in the next twenty years, it is a great idea for parents and relatives of children to begin saving for their future as soon as possible. Like most forms of investment, it is best to start saving for college from the beginning, even if by only putting $25 a month into a separate account dedicated to education costs. The sooner you begin this process, the more money you will be able to work with in the end.
There are a few different ways you can choose to estimate your child’s expected costs of education in the future. Some analysts recommend following the 2K rule, which suggests establishing a savings goal for your child’s education fund according to their age. The rule of thirds, on the other hand, directs parents to try to put away one-third of the current cost of education before graduation day comes and pay for the other two-thirds in different ways. Regardless of how you decide to estimate your college savings goal, you will have to choose the best strategy that can enable you to meet your goals. Popular options for families across the country include 529 college savings plans that allow for tax-deductible deposits, prepaid college tuition plans that lock in tuition prices at current rates and Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) that offer reduced tax rates on eligible deposits. Your family should choose the estimation method and savings strategy that best meets your needs and goals.