Building a family budget: How to create one that works for you!
Though parents have similar needs, they differ in money management habits. Here's how to craft a budget that complements your saving and spending style!
Creating a budget can be easy for some, but actually sticking to it is the real challenge. When managing their family’s finances, parents want to find the best way to stretch their peso, while saving enough to provide them stability and security in the future.
As of 2016, the Philippine Statistics Authority found that the average Filipino middle-class family earns about P22,000 each month. With prices continuing to rise, it becomes more important to adapt and come up with effective strategies year after year.
Each family, though they have the same general needs, has a different money management style, but here are 6 guidelines to remember when creating a family budget that will surely help regardless of how you spend or save as a family.
1. Keep it simple
When coming up with a household budget, it’s best to simply write down your priorities–including long-term goals and dreams–and ranking them. Excel spreadsheets could also help, but simply keeping a journal and tallying daily expenses (and keeping receipts!) can help you be more aware of your spending habits.
2. Separate fixed from optional expenses
Once you’re ready to allot budgets for expenses, make sure to distinguish between the constant expenses, like rent, water, electricity, insurance and the discretionary expenses, like travelling, shopping for clothes, or dining out.
3. Set realistic goals
One of the most helpful things to do when creating a budget is determining problem areas and working that in to your plan. Do not put too much pressure on you and your spouse to immediately stop going out to dinner and movies, for instance, if it’s your way of bonding and spending time together. Find alternatives. Are there areas you can cut down on? Would you be better off staying in, cooking and watching a DVD instead? Little adjustments can go a long way.
4. Get out of debt
Debts should not be allowed to accumulate as it is one of the things that can truly cripple you financially, if not addressed early on.
No matter how much you spend, debts can hound you and deplete your funds without you realizing it. Make sure to settle all debts, from credit card bills to paying back money you borrowed from a relative. Striving to climb out of debt will not only free you up to move forward with your budget, it will also help ease anxiety.
5. Create buffer amounts for frequent expenses
Fixed expenses like water and electricity bills vary month after month. Make sure to give these bills an allowance in your budget. Note the highest possible bill you’ve ever received and anticipate the possibility of being charged that amount each month. If you are billed less than that, then you could use the excess for other expenses.
6. Use cash when paying in person, as much as possible
There’s no temptation like having a credit card handy and ready to use. To minimize the habit of overspending, use cash when making purchases in person. What many financial advisers would recommend is separating cash for groceries, gas, or transportation fare into different envelopes and then labelling them accordingly. This conditions you to be more restrained because you can actually see the cash that you are spending.
We hope these tips help! Let us know what strategies have helped you create a household budget in the past in the comments below.