5 Money Management Tips For One-Income Families
Family finances can often be a very difficult subject – especially if you’re with a new partner, thinking of starting a family or have just been blessed with a little one. In this article Junie Rutkevich covers 5 tips that will help you look at your finances and help you prepare a family budget.
For many couples, deciding to have children brings an additional question: “Can we cover household expenses and pay for a new baby with one less financial provider in the home?” For those families who opt to have one parent stay at home after the birth of a baby, smart money management becomes more crucial than ever. One way to do this is to start with understanding what you’ve got, then planning for what you need. Here are some suggestions on how to live within a budget in a single-income home.
1. Define Bi-Weekly Spending
When asked to estimate how much money is spent in a two-week period for household expenses, many parents have a hard time coming up with a figure. The easiest way to calculate how much you spend overall is to identify specific regular expenses, for example: $90 for groceries, $20 for dry cleaning or $90 for bills. Once you’ve made a list, it’s easy to come up with a monthly budget. It may help to use your checkbook or a simple computer program to record and compare monthly expenditures.
Editor’s Note: Keeping track of finances can be a bit daunting at first but there is some handy software, templates and printables available to help you keep track of your finances: My personal go-to financial planning tool is Manager which is available as a free download for Mac and PC. If you’re looking for something that’s a bit simpler, check out these free budget templates in Excel format (although you should be able to load them in to Libre Office or Google Docs if you don’t have access to Excel) or if you’re more paper-based then Fab N’ Free has some handy printable income, bi-weekly finances and bill tracking PDFs.
2. Identify Wants Vs. Needs
When trying to minimize expenses, it’s sometimes hard to give up things that we want, particularly if we’ve grown accustomed to having them. It’s important to go through your expenses to try and decide whether and item is nice to have, or you need to have.
Do you need all of the TV channels available or can you cut them down? Do you really use all of your unlimited internet or is it better to have a cap and occasionally use the library? Grab a coffee from a store in the morning, or buy lunch? Maybe you could make your own. Think about the items that are truly necessary, those that are nice to have and those you can really do without and try to prioritize these needs as wants as best you can.
If the above exercise shows that you are spending an excessive amount (as it relates to your income) on certain “wants” (like dining out), it’s important to acknowledge that expense and discuss alternatives. This step involves compromise and sacrifice, but it’s integral to saving money. It will be a hard choice to make but ultimately your financial situation can only improve and you may find you prefer the alternatives – especially if you can save a lot of money.
3. Assign Dollar Amounts To Each Category
When developing a household budget, it helps to factor in fixed costs first, and then include additional family-related expenses. These are the expenses that are consistent every month, such as the mortgage and a car payment. If the costs of a certain item vary from month to month, look at what you’ve paid the last three months and come up with an average. If you are expecting your first child, ask friends about how much they spend on staple items such as food, diapers and formula to help calculate these expenses. You also may need to budget a few extra dollars in the first few months for major equipment you need, such as a safety car seats, multipurpose strollers, sturdy crib and crib mattresses. Keep in mind baby products that don’t need to be purchased immediately such as a high chair that can be bought at a later date. Here is a great guide post that will enlighten you what you actually need right away and later on.
And don’t forget the importance of hand-me-downs – a lot of your friends may have equipment their own children have outgrown and will be more than willing to pass them along to a good home.
4. Devise A Savings Plan
It’s a good idea to include a savings plan as part of your budget. Whether its $.50 or $50 a day, many of us tend to fall short when it comes to putting money away. But let’s face it: Most people would agree that they feel more comfortable with some sort of financial cushion for unanticipated costs or emergencies.
5. Discuss And Reorganize Your Budget As Needed
Be prepared to reassess your budget regularly or whenever there is a change that affects the family finances. Whether it’s a debt that is finally paid off or you need to buy a second car, you will need to make adjustments to the budget.
Finally, remember that when it comes to maintaining a budget, discipline is key and documentation is critical. If you keep good track of what you’re spending – and saving – you’ll feel more in control of the family finances.
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