Organization

7 Questions to Ask When Creating a Family Budget

Creating a family budget is a joint effort. Including the entire family, even kids from a young age, helps everyone get on the same page. An added bonus is that the kids get early financial literacy lessons – something many of us missed out on when we were younger.

 

Ask yourself these seven questions when working on your family budget:

 

  • What’s coming in?
  • What’s going out?
  • What are your goals?
  • Where are the leaks?
  • How can we fix the leaks?
  • How can we make more money?
  • How can we plan for the future?

 

These questions will get you started with a basic budget for your family. Adding in fancy tools and apps can come later, after you’ve identified the problem areas and started working on fixing them.

 

What’s coming in?

 

Look at your income sources. Whether you’re a one-income family, or you’ve diversified your income so you’ve got income coming in from seven different streams, knowing what’s there is an important first step to creating a family budget.

 

Write out exactly how much money is coming in, when it comes in, and where it’s coming from. You can do this on paper, or use a spreadsheet or app. I like the Rocketbook for writing with pen and paper because it’s erasable and reusable, but I still get my “writing on paper” fix. 🙂 {rocketbook affiliate}

 

What’s going out?

 

Print off your bank statements for the last six months. Where is every dollar going? Again, there are apps that can help with this but I like to start with the basics of printing off bank statements and highlighting necessary versus unnecessary expenses. Cutting unnecessary expenses will be something we work on later, so keep those statements handy.

 

Evaluate: is the number coming in bigger than the number going out?

 

What are your goals?

 

Setting goals is a critical step towards financial freedom. Getting out of debt, paying for college, or retiring early are some common goals. Sit down as a couple, or family, and decide what your short-term and long-term financial goals are. Look at the 1, 5, and 20 year plan. When do you want to retire? What will it take to get there? Once you’ve figured out your goals, you can write down an actual dollar amount to strive for, and work backwards to figure out how to make it happen.

 

If you’re in a relationship, getting on the same page with your partner is so important. Studies show financial issues are a leading cause of divorce. While some compromises may have to be made from both sides, having open communication about finances and goals will help make this path much simpler to follow.

 

Being on the same page with your partner, and getting your kids on the same page, will make your journey to financial freedom much smoother.

 

Where are the leaks?

 

Once you’ve written out all of your household income and expenses, it’s time to conduct a full audit and figure out where the leaks are in your budget. Remember those bank statements? Time to go over them with a fine-toothed comb: is it necessary? Does it enhance our lives? Can we afford it?

 

Look at categories like fast food, entertainment, and travel. Don’t forget about recurring subscriptions, and anything you may pay for with Paypal, Cash App, etc.

How can we fix the leaks?

 

Acknowledging the leaks in the boat is a great step towards creating your family budget, but you must execute fixing the leaks or you’ll be back at square one in no time. Using a highlighter, I color all necessary expenses in with one color (say, yellow). Then, I highlight the unnecessary expenses in another color, like green. This gives me a quick “at a glance” look so I know exactly where my focus should be.

 

Fixing leaks can be as easy as cancelling cable and getting Hulu, or calling the internet company to negotiate a lower rate. If you find yourself or your partner eating out frequently, turn it into a challenge to eat at home for the next 30 days straight. You’ll be surprised at how easy this is after a few days of saying “no” to unhealthy fast food. You may even notice you’re feeling better as you nourish your body with healthier food choices!

 

How can we make more money?

 

Making more money is so much easier to do with the internet! 50 years ago, making more money meant you had to spend more time doing something – delivering papers, mowing yards, etc. Now, you can set up passive income streams where you create something once and it sells over and over again.

 

If you’re not super tech-savvy, there are other options like UberEats. Not only can you deliver food to people, you could create a blog or vlog about your experiences and share them with the world. When doing this, you will create another stream of income! People love following blogs and vlogs, and if you can teach others how to hustle like you are, you’ll have not one – but two new income streams!

 

How can we plan for the future?

 

Planning for the future as a couple and as a family are both important. Looking at your 20 year plan, how much money do you need to retire comfortably? How will you get there?

Teach your kids from a young age about saving. Some parents pay an allowance each week for chores, while others don’t. Either way, when your children get money, make sure they save at least half of it. Getting in this habit when they’re children or young adults will make it much easier to stay in that habit when they are older and get jobs, go to college, and move out on their own.

 

If they’ve been saving half of their income for most of their lives, they can stick with it when they have their own bills to worry about. They’ll be much better off than most of us are right now, and instilling it in them before they’re financially responsible for themselves can help it become a habit early on.