Budgeting can be a tough subject for families to tackle, especially when it falls on the shoulders of the main breadwinner. But it’s important to have these conversations and come to an agreement on spending and saving, because money is such a huge part of family life.
There’s a four-step cycle in budgeting the family cash to keep harmony and peace. Here’s what you need to do:
1. Establish. Your family’s priorities are not the same as your family’s goals. Priorities are areas of your family life that you need to focus on, like your children’s future or your health. Goals are specific targets that support your priorities. You shouldn’t have too many goals because it defeats the purpose of establishing priorities. You should only have one goal, but 2-3 are realistic because life isn’t perfect. Write your family’s priorities and goals down on a piece of paper where everyone can see them as a reminder of what your family is focused on for the next few years.
2. List your targets down. Prioritizing and agreeing on priorities as a family is the first step, but after that, you need to establish some quantifiable targets to help you achieve those priorities. A great economic goal for a child’s future schooling, for example, would be to save 10-15% of your family’s income. Try to limit yourself to 1-2 targets per priority, so you can stay focused on what’s important.
3. Work towards your targets. After setting your priorities and targets, it’s time to start living by them. All the actions of your family should be geared towards working towards your targets. This means tracking your progress and making improvements where necessary – especially when it comes to your financial targets. There are various ways you can do this, such as using an income and expense-tracking tool, setting a budget for future spending, or investing in a household accountant or computer software. Whatever method you choose, the most important thing is to have a system in place to track the performance of your family and see how close you are to reaching your targets.
4. Assess your family life. There will be certain points in your life when you stop and reassess how you’re doing against your personal goals and the goals you have for your family. You can check off the goals that have been met and set new ones. Major changes, such as a career move or a relative moving away, may require you to reevaluate your priorities.
The cycle starts anew, just like it does for life, when such a time comes!
