Though the first of the year is often the time many of us sit down to plan out budgets and get a good handle on finances, plans and other visions, it’s important to take stock of your finances several times a year. You’ve (probably) paid your taxes, you may even have paid for an upcoming summer vacation. What better time to to tackle a new (or a first) budget for the family that will help you establish priorities, goals and shape the remainder of the year?
Budgeting doesn’t have to be just for adults only, either; getting your kids involved in the process is a great way to teach financial savviness early and prepare them for a future built on a solid foundation of financial literacy. The more involved in the process they are, the more kids can understand why some of their desires may not be possible, and you can show them that with careful attention, patience and responsibility, many goals can be achieved over time. This guide offers nine tips to help parents budget better.
Evaluate Your Family Expenses
It can be easy to overspend when you aren’t paying close attention to your expenses. Especially if you have more than one child, expenses add up stealthily. To start balancing a budget, take a close look at what you spend and where. You can think of your costs as falling into two categories: fixed and variable. The fixed expenses are the crucial things you have to pay every month and stay relatively the same from month to month: housing, food, utilities, etc. The variable expenses may only occur a couple of times per year, may not be crucial — such as vacations or gifts — and include unexpected or rare expenses such as a car or appliance repair.
Base Goals on Your Budget
You might attempt to set independent financial goals of what your income and expenses currently reflect. However, until you know what’s really coming in and going out, any financial goals you set will be theoretical. First, determine what income is left after expenses and then consider goals such as saving for retirement, emergency fund, kids’ college and travel.
Involve the Kids in the Budgeting Process
The earlier you expose your kids to money management tips, the better for their own long-term financial health and habits. Showing your kids what money you actually have can also go a long way toward staving off their unreasonable expectations for things, from toys to travels, that you can’t yet afford. You can also set them up to earn their own money, save it and spend it responsibly, skills they will need sooner than later. Plus, having kids help brainstorm ideas for cost-cutting tips can soften the struggle of having to tighten your belt and create family bonding.
Assess Child Care Expenses
Paying for child care, whether in-home or at a day care style facility, can be a costly enterprise, averaging anywhere from almost $10,000 per year, per child to more than $13,000 per year. First, parents should do a cost-benefit analysis to see if the cost of child care is even affordable, given what you earn. For example, if you’re barely breaking even on the cost of child care, it may be time to ask if the job you have is worth it, or if it’s better to stay home with your kids. But if it is worth it, or you don’t have the luxury of leaving your job, you might consider alternative schedules with your spouse, working from home a few days a week (if you aren’t already), a nanny-share or co-op.
Make a College Savings Plan
You may not be able to fathom college when your kids are still in diapers or elementary school, but these are precisely the years when you want to begin saving for that eventual expense. While you may not be able to put a lot toward it, consider opening a 529 plan, which often allows you to deduct contributions from your taxes, from which funds are tax-free to take out and use toward paying for college, and earn interest over time. What you are able to save over time may determine the kind of college you can send your child to, a less expensive community college versus a state or Ivy League university.
Consider Buying Secondhand
Once you’ve assessed your budget, you’re likely going to find areas where you can cut back in order to free up income to meet other financial goals. One of the easiest ways to cut back on spending is to purchase things secondhand, particularly clothing and even furniture. Now, with sites like ThredUp and Poshmark, you can even shop frugally online. The benefits of secondhand, alongside a lower cost, especially if you have kids, is that you won’t feel it as much when kids grow out of clothes or worry if you stain or tear things.
Another excellent and simple way to begin saving money on the things you purchase every day is to switch from buying name brands to shopping for generics. Generic products can range from food to household items, to medications. Ask at the store if you don’t see a generic, or store-brand, option. Shop online from sites that only sell generic. You can save hundreds, if not thousands of dollars per year.
Find Low-Cost Fun Family Activities
The pandemic taught most people how to find low-cost and affordable ways to keep your family entertained. Many people learned to spend less on such things as travel, going out to eat, and even working out at home instead of the gym. But if you’re still looking for ways to cut back, don’t forget old school activities cost little to nothing, such as board games, charades, scavenger hunts in the neighborhood, bike rides, walks at the beach and many other ways to have fun.
Plan For Retirement Savings
There’s never a bad time to take a good look at your future retirement planning. It can be hard to think of retirement when your kids are young, but those years will be upon you before you know it. If you don’t already have a retirement account through work, or any other sort of savings, now is the time to start, and the later you start, the more money you should allot in your budget to this endeavor.
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