Creating a family budget can seem like a daunting task, but it may surprise you how a family budget can bring you together and give the family a shared sense of purpose.
Review your non-essential spending, and set priorities and spending limits
Looking to spend some meaningful family time together? How about creating a household budget?
Before you recoil in horror, hear us out. Creating a family budget can seem daunting, but it may surprise you how working on a budget can create a shared sense of purpose.
“Let’s face it. Having a budget in place is very important,” says Robert Siuty, senior financial consultant at TD Ameritrade. “Without a budget there is no defined direction. There is no solid foundation.” So why not make it a family affair?
Nancy Doyle, whose latest book is Manage Your Financial Life: Just Starting Out, agrees. “This is such an important topic for couples or for a family because it lays the groundwork, and everyone’s on the same page. For parents, you’re teaching such important lessons to your kids,” she says.
“It comes down to goals,” says Siuty. He suggests families write down all their goals in order of importance. “Create a spreadsheet and break it down by income and expenses for the month, see if there are any expenses you can cut back on or possibly eliminate giving you additional dollars for savings,” he says.
In her book, Doyle says the rule of thumb for a monthly household budget is 50-30-20, where 50% of your spending goes to essentials, 30% goes to non-essentials, and 20% goes to paying down debt or building savings. If you’re having trouble saving, download all your financial institution data and identify where you can make some changes.
Doyle personally did this a few years ago and was surprised to learn just how much she and her husband were spending on their children’s activities. And it’s not just adults spending mindlessly. “Younger people are probably spending a lot more on ridesharing than they realize,” she says, adding that eating out is a big expense for everyone.
If your family tends to mindlessly overspend, Siuty suggests treating savings like an expense. “Make it a committed line item, or forced savings,” he says. “Those small savings can really add up over time.”
Depending on children’s ages and maturity, you may not want to open all your financial books to them. But at a minimum, gather information about non-essential spending and discuss as a family why it’s important to prioritize spending in the household budget.
“You can even make it a game where everyone thinks of one idea for cutting back. I’m a big believer in articulating your goal,” Doyle says.
If you accomplish a goal of saving more than $100 a month, reward yourself. Take a bit of that savings and do something special, she says.
Setting priorities can be delicate, especially with children. “You don’t want children to feel guilty for using resources that you provide, but also they need to realize that they can’t do everything. It’s time and budget,” says Doyle.
It can be easier to address budgeting if parents can combine the two topics: “How do you like spending your free time? What activities do you enjoy the most?” Such questions are especially important in a world of overscheduled kids. “That’s a great way for them to prioritize in terms of the expenses associated with these activities but also their time,” she says.
When it comes to budgeting non-essentials, consider categories and apply limits. That’s especially important when using apps like Venmo, which allows you to pay friends with a click, she says.
Depending on what’s important to the individual, non-essential categories could be subdivided and each prioritized with a monthly spending cap. Some categories include clothing, eating out, rideshare, online movie or TV fees and online gaming.
Don’t forget charitable giving. Doyle says her family realized they were donating small amounts to several organizations, and decided instead to concentrate their donations on a few favorites. Have each family member research a charity and present to the family why that charity is worth supporting. This also reinforces the family’s shared values.
“With our family we focus on a few things and we share with the kids what things are our priorities,” Doyle says.
Finally, when planning that household budget, make sure to treat yourselves once in a while. “You still need to live a little,” Siuty says. “So reward yourself for hitting a certain milestone.”
Do Not Sell or Share My Personal Information
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Nancy Doyle and Venmo are separate from and not affiliated with TD Amiertrade, which is not responsible for their services or policies.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2024 Charles Schwab & Co. Inc. All rights reserved.