Proper financial management allows you to control expenses and save and prepare for unexpected costs. To do this, it is important to realistically assess spending and not be afraid to involve loved ones in the discussion. These tips will help you manage your family budget wisely.
1. Refrain from large rash purchases
Vehicle ownership is expensive and often unnecessary. As public transportation continues to increase, owning your own vehicle in a large city may soon be a thing of the past. A better option may be to choose car rentals because they have become so convenient and affordable to everyone.
Suppose you have an irresistible desire to drive a luxury car. In that case, you can, for example, take a Porsche for rent in Dubai during your vacation and enjoy driving a rented luxury around the roads of a fairy-tale city without having to buy an expensive family car and spend outrageous sums to keep it alive.
2. Make a list of income and expenses
To take control of your money, it is necessary to describe in detail all sources of cash receipts, such as wages, investments, and benefits of all working family members. Also, do not forget to include third-party sources of income, such as a side hustle or other small income sources.
The expense column includes rent or dividends, food, water, electricity, gas, telephone, cable, internet, transportation, clothing, personal care, car fuel, credit cards, loan payments, and even vacations.
For more information on how to create a monthly budget, refer to my related article on budgets.
3. Manage your expenses
The ideal family budget formula is 50-30-20. According to this system, 50% are your mandatory payments (loans, food, utility bills, planned medical examinations, etc.), 30% are “pleasant spending, aka wants” (clothes, shoes, buying equipment, travel, manicure, beautician, restaurants), 20% – investments (savings and from the same funds – charity).
It is essential to analyze your monthly expenses: are your habitual daily costs vital?
4. Shop smart
There are a few rules here to help you get it right. Everyone probably knows about the first one: don’t go to the store hungry! Otherwise, your grocery basket will undoubtedly be filled with delicious and unhealthy food, most likely, consisting of fatty carbohydrates. Instead, decide in advance how much money you can spend today and stick to your budget.
Important: make a shopping list. Ideally, develop an approximate menu for the whole week in advance and write down the products based on these plans. The list will help you to not buy anything extra and not forget anything you need. Remember that all the most budgetary goods in stores are located on the lower shelves. The most expensive ones are at eye level.
For example, Actress Julia Roberts earns millions of dollars and can afford whatever she wants. But she says: “If I see that milk costs five dollars in one store, and in another – three, then I will go where it is cheaper. I see no reason to overpay.”
5. Don’t ignore your savings
The difference between income and expenses is the monthly savings. It is necessary to ensure that this indicator is always as high as possible. It should be at least 10% of the total income.
With these savings, you can cover expenses for emergencies or unforeseen circumstances, invest in a new business, or fulfill your desires.
Any family budget that you can actually stick to is a good way to manage your money. Some families utilize a full family approach while others separate their budgets.
• General budget: all family members send their income to a single checking account; funds are also spent by everyone.
• Separate budget: “I earn, I spend.” Each family member has a separate savings and checking account and debts and incomes are individualized. The difficulty lies in achieving common family goals. It is also difficult to assess the situation when money is needed urgently – family members do not have information about each other’s available funds and opportunities.
• Mixed budget: each family member divides their income into two parts – general and personal. There are joint savings, but you have funds, for example, to buy your wardrobe items, pay for your entertainment, and so on.