Family Monthly Budgeting

If you’re like most families, you find it hard to keep an active tab on where your money goes. You’re extremely busy with work, school, extracurricular activities, family time, date nights and vacations. And amongst the whirlwind, your bank account withers and your debt grows. If you have trouble understanding where things add up, it’s time to create a family budget.

There’s more to creating a budget than plopping some numbers into a spreadsheet. If you want to create a family budget that’s going to make an impact on your savings and debt payments, there’s a few things you need to consider.
First, get everyone on board. Having the buy-in of the entire family is a crucial step in successfully budgeting. Pair each family member with an ‘accountabili-buddy’. It sounds incredibly cheesy, but having someone else to motivate you, talk you out of unnecessary purchases, and hold you accountable for your budget, will make it easier to stay disciplined. Everyone will be more likely to succeed if this is approached as a team.

Before you iron out a family budget, first you’ll need to take a temperature check. This will consist of two simple questions: How much do we have coming in? And, how much of that income are we spending per month? Tackle the ladder first, it will take a little more time and effort as you put the families spending habits under a microscope.

When tracking your monthly spend, be sure to include everything you can think of. From the $2 cup of coffee per day, to the $1200 mortgage payment – it all counts. As you’re creating your list, it would be helpful for you to categorize each item into ‘Necessity’, ‘Nice to have’, ‘Want to Have’, and ‘Could Go Without’. This is not only going to give you a wide angle view on the entire families spending, it’s also going to help you decide which things can be cut or altered.

Now that you know what your family is spending, compare that to the income that is coming in. Just like when you were tracking your spending, include everything. Does one of your kids now have a paper route? Are you due for an income tax return? Creating a budget that’s going to work for you requires knowing what to expect and how to allot it properly.

Is there a large gap between the amounts you’re bringing in from the amount your spending? It shouldn’t be less, in fact, you should be aiming towards being in the green enough to save. In order to get there, you must work on necessary alterations to the list of things you spend money on. Perhaps that paper route means you can cut down on allowance, or you can put that tax return towards paying off a credit card.

Next you need to ask yourself, what are we trying to accomplish? Are we trying to reign in our wild spending? Are we paying off debts? Are we saving for things such as tuition and retirement? There’s a good chance it could be all three. Accomplishing your financial goals is one of the best parts of creating a family budget, and it offers you the discipline to create new goals once your old ones are complete.

You have everyone on board, you’ve outlined your income and compared it to your spending, and your goals are posted on the fridge, now it is finally time to create your budget, right? There’s one more step you need to take before finalizing your budget, and this is the fun part – rewarding yourself! Keep up with milestones for the entire family, and set rewards and incentives on achievements. Everyone will be motivated to succeed, and make sure you have fun with it.

Likewise, you should also set consequences for when the family falls short on their goals. This form of motivation isn’t the most fun, but you’ll be surprised how disciplined your teenagers will become if their Netflix subscription is threatened to be canceled.

At last, you can now create your budget. You’ll be happy to know that you’re done with the hard stuff. The rest is just logging progress and making the proper changes in order to keep up with your plan. Aim to cover your necessities first, then focus on what’s most important to everyone. Making dinner as a family at home instead of going out to a restaurant will be worth it if it means paying down some debt, or saving for a family vacation.

Logging your progress is critically important to your financial wellbeing, but by already having the conversation with your family and organizing your spending habits, you’re one giant leap towards accomplishing your goals.

Download your free budget template here, and contact Rita Anderson and Associates for a free consultation if you feel you need additional help in achieving your goals and paying down debts.

The First 5 Steps Toward Financial Wellness

The hardest part to getting your finances in order is knowing those first steps you should take towards improving them. It’s easy to feel overwhelmed and opt for ignoring your financial troubles, hoping that they will disappear. However, the longer you wait to understand and straighten out your finances, the worse it is going to get.
The good news is, it’s never too early or too late to start. If you’re missing payments, behind on priority debts, or even if you just want to find some order when it comes to finances, here are the first five steps that will lead you towards financial wellness:

  • Take a Financial Check-Up – Create a budget chart either in Excel or use one of the many free spreadsheets available online. Record all of your earnings for the month and weigh that against all of your expenses.

    It’s important to record all of your expenses, including bills, services, rent/mortgage, but even the smallest things. If you’re paying $6/week at the laundromat, include it. It could be worth your while to take a week and keep all of your receipts (coffee, gas, parking, etc).

    You’ll be amazed at how everything adds up. It might take some time, but the small nuances now will mean better financial health down the road.

  • Know What You Owe/Know Your Interest – If you’re going to climb out of debt, you need to understand your debt from top to bottom. You would be amazed how many people don’t actually know the total amount they are in debt.

    Compile all of your credit cards, car loans, bank loans, mortgage, student debt and any other debt you have into one total. Now that you have that number, figure out how much of your monthly bill payments are interest. Highlight which items have the highest interest rate (credit cards are typically the highest).

    Having a firm grasp on your debt and interest payments will allow you to plan with urgency, and help you break down your goals.

  • Set S.M.A.R.T. Goals – Telling yourself you want to be debt free, or you want to save more money won’t cut it. If you want to see results and set a plan that you’re going to stick to, first you need to set goals that are Simple, Measurable, Achievable, Realistic, and Timely (S.M.A.R.T.)

    Think “I want to pay off $8,000 in credit card debt within 18 months”. This allows you to keep track and note progress. Setting realistic expectations of yourself will also stop you from kicking yourself over the things you don’t have and allow you to put more positive energy towards future goals.

  • Make Your Plan – Now that you understand what’s coming in, what’s going out, where it’s going and the results you want from yourself, it’s time to create a strategic plan on how to reach your goals.

    Like your goals, your plan should be realistic and achievable. Where can you make changes? Start with the small things like cooking at home instead of dining out, making coffee at home instead of buying coffee every day, or cancelling a magazine subscription. Then you can plan to look into some bigger changes such as researching cheaper insurance, going on a lighter cable package, or downsizing to one car vs. two.

    Start small, but think big. Every dollar you can save by making a change to your routine is a dollar gone from your debt or added to your savings.

  • Consider Your Resources – Have you realized that you’re paying out more each month than you’re taking in? Have you discovered that you’re paying multiple high interest payments per month and not moving forward in eliminating your balances?

    Seeking help from a professional to better understand your options could uncover solutions you didn’t know were available. Rita Anderson and Associates offers free initial consultations, and has the experience and the creative know-how that can put you on the right track.

Getting your finances in order and climbing out of debt doesn’t have to be a struggle. Facing the issue is a giant leap towards improving your financial wellbeing and sometimes the biggest investment we can make is understanding our situation and committing to a plan that will change it.

Six Warning Signs of Unmanageable Debt

There may have been a point in your life when you were able to manage two credit cards at once and not feel like you were in over your head. Lately, however, you’re feeling like your finances have gotten away from you, suddenly you’re overwhelmed and aren’t so confident in your ability get back on track.
What most people don’t understand is that most debt is incurred over time, typically not all at once. Unmanageable debt is a slow burn, oftentimes going unnoticed until you realize things are a little too far outside of your comfort zone.

If you feel like you’re debt is becoming too unmanageable, keep an eye open for these warning signs:

  • Late on Payments –You should have a thorough understanding of all of your monthly payments, especially the ones that accrue interest. These bills should be your top priority of where you dedicate your income. Not being able to make these payments, or only partially paying off your bills will result in late fees and even more debt piled on what you owe. If you can’t manage your payments, you can’t manage your debt.
  • “Robbing Peter to Pay Paul” – This old saying refers to needing to use credit cards or loans to pay off lesser credit cards or loans. This short term solution is accompanied by some severe long term problems. You’re basically incurring more debt and building up higher interest payments. This game offers no opportunity for progress, and eventually the cycle will end, leaving you in a worse financial situation than before.
  • Inability to Save Money – Someone who is financially healthy typically has enough back-up savings to cover between three to six months of expenses. If you find yourself living paycheck to paycheck, and can’t find a way to save money, you may be in more trouble than you realize. Consider what would happen if you lost your job or a large expense was unexpectedly put on your plate. Your entire income shouldn’t need to be devoted to bills and debt payment.
  • Overdrawn Bank Statement – Buying a cup of coffee shouldn’t add to your debt total. Paying for minor things with overdraft or credit cards is going to slowly build up, and really hit your interest payments. Your overdraft is a safety net, if you’re falling into that net often – especially for minor purchases – it’s time to seek additional support.
  • Not Knowing What You Owe – Ignorance is not bliss. Keeping tabs on your debt is the best way to manage it. Understanding what you owe and how much interest you’re accruing will help you measure spending and keep your finances from getting out of hand. If you don’t keep your finances under a microscope, you won’t notice how fast debt is building up or how big the pile is getting.
  • Burning Bridges – The most crucial sign of all is damaged relationships with friends or family over finances. Conflict is never the answer to financial problems. It might be time to take accountability for your situation and work together with those close to you who are willing to help. Commit to forming solutions instead of spending energy blaming someone else.

If any of these signs sound familiar, your debt may have become too unmanageable for you to handle. The good news is you have the resources available that will help you find the solution. Rita Anderson and Associates have been helping people overcome their financial challenges for over 30 years. We have the expertise to help you resolve your debt, and are happy to provide you with a free consultation.