Many families may feel that they have their spending under control, or think they are currently handling their finances well enough, hence, do not see the point of creating a budget. Yet, at the end of the month, they find themselves struggling financially and relying on their credit cards to pay their dues. With the way that debt is encouraged, over 90 percent of Americans spend majority of their disposable income in paying (back) debts owed.
Currently, Americans collectively charge over $1 trillion every year on their credit cards, and owe more than $500 billion in interest alone. When you add credit card debt to the regular monthly bills that we all have to pay depending on where you are in your life—, this can result in some bills going unpaid and others being paid late which starts additional problems that could have been avoided by simply implementing a family budget.
A budget gives you an action plan and a clear picture of your financial position every month. It helps to determine where you want to go as a family, so that you can achieve those goals collectively. It does not matter if the goal is to get out of debt or save up for your next family vacation.
Creating a budget is the easy part; sticking to it is the tough bit. That’s why I want to share these 12 creative budgeting tips to help you and your family achieve your financial goals.
Tip #1: Set financial goals
Take a moment to reﬂect on your current situation. Are your ﬁnances where you want them to be? If not, what can you do in the next 30 days, two months, six months to a year to be on track to a better financial situation for you and your family? Setting financial goals and sticking to them can help you achieve your desired goal.
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It’s important that you set goals in life that have a clear destination for the journey you’re undertaking. You can start by setting three strong financial goals. These goals should be realistic and have a deadline by which you will achieve them. Here’s an example of a weak goal and a strong goal.
Weak: “My family’s goal is to have more money for our summer vacation.”
Strong: “My family will save $10,000 in the next 12 months for our summer vacation in 2022.”
To reach these goals, you need to write out what you will need to accomplish each of the goals you set.
After you have determined your family’s three ‘strong’ financial goals, you’ll want to be sure that you monitor your progress against these goals periodically. This leads us to tip #2.
Tip #2: Have a budgeting night
Managing your finances should not be boring. Add budgeting nights to your family’s calendar, and do it as a family every week to ensure your finances are on track. Make it fun! Offer some incentives at the end of the month for the person who comes up with the best budgeting hack for the week to figure out ways to cut back costs.
Once you have found the best hack, implement that for the next month because even after creating a family budget, you’ll want to do routine check-ups to see if and where you can cut some additional unnecessary costs. Also, see this beautiful article on managing family finances and how to handle money issues.
Tip #3: Pick a budgeting philosophy
Financial advisors like Dave Ramsey suggest that everyone should save at least $1,000 in an emergency fund to start with.
Robert Kiyosaki, in his ‘Rich Dad, Poor Dad’ series, recommends that you should pay yourself first. Every person should save at least ten per cent of their paycheck while the remaining amount can be used to pay taxes, bills, and living expenses.
Another popular budgeting philosophy is the 50/30/20 rule. This rule suggests that each month, you allocate 50% of your paycheck to “needs”, 30% to “wants”, and the remaining 20% to “financial goals”.
As you can see from the few examples I’ve mentioned, there are many budgeting philosophies. Ultimately it will be up to you and your family to decide which works best for you, and that can be decided on at one of your budgeting nights.
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Tip #4: Separate your savings account
Studies done in behavioural finance have suggested that if you give your savings account nicknames such as “emergency fund”, “kids’ college fund”, or even “my splendid retirement fund”, chances are that you become more serious about your savings.
The rule of thumb for your savings account is that you do not withdraw any funds from it unless there is an emergency. Then that money can be pulled from the account (budget) allocated for that event and replaced immediately before moving on to new financial goals.
Tip #5: Use an online budgeting tool
Keeping good records is vital for your family’s success in implementing a budget. There is no “set it and forget it” for anything, especially when you are attempting to achieve something new, there will always be room for improvement the same is true with budgeting. There are some online budgeting mobile applications that can help keep track of your income and daily expenses to figure out where you can make further adjustments to meet your goals.
Most of these apps have the capabilities to convert the data into charts and graphs to show your progress through visualizations. This can add an interesting and interactive dimension to reviewing your finances.
"There is no secret to success, but there is a system that works. The same is true for financial freedom, setting yourself up with a system (or plan) that gives you control, flexibility, and liquidity."
Tip #6: Take advantage of second-hand opportunities
In today’s materialistic world full of social media facade, for example, portraying unrealistic living standards —many people attempt to portray a certain lifestyle that they may not actually be living based on their current means.
It is thought that spending money to go on vacation, eating out at fancy restaurants, and hanging out with friends help strengthen better connections with these individuals. It may even have others aspire to live as they believe someone else is from their social media posts.
This tends to leave most parents feeling pressured to ensure that their children don’t feel inferior, so much that, they feel obligated to spend money on clothes, eating out, expensive gifts, and impulsive purchases to prove a point to the ‘world’. This is a short-sided cycle that only perpetuates debt and financial burden.
Buying second-hand clothing, having yard sales, using meal vouchers and coupons, and looking for discounts are great ways to reduce your expenses. You never know, you might even find something that you absolutely love.
Tip #7: Have a budget for fun
When creating a budget, it may seem easy to look at your expenses and start slashing. Although this budget may look good in theory and build savings quickly, you have to ask yourself the following: Will I be able to stick to it? What will it do to my quality of life?
After all, splurges and fun are factored into the 50/30/20 rule of budgeting at a higher percentage than savings and investments for a reason.
Tip #8: Beware of the little things
Smaller $5 expense items (such as a morning Starbucks coffee every day) can seem insignificant, but cumulatively, it’s these small purchases that can put a dent in anyone’s budget.
Be sure when creating a budget that you consider setting a weekly limit for your smaller purchases and stick to it. Or better still, using this same example, imagine if you were to invest in a coffee maker to make your coffee every morning how much you can actually save.
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"Managing your finances should not be boring. Add budgeting nights to your family’s calendar, and do it as a family every week to ensure your finances are on track."
Tip #9: Slow down your expenses
If you have significant expenses coming up like a wedding, honeymoon, buying a car, buying a home, etc. In that case, it is better to spread these expenses out over a few years rather than doing all of them in a few months.
Tip #10: Budget for unexpected expenses
Beware that the unexpected does happen, so prepare yourself for unexpected (or unforeseen) expenses like renovation/repairs or some other seasonal expense that might come your way.
Tip #11: Hold a savings competition
Hold a savings competition with your neighbours or someone else in a similar financial position as you are in. Have monthly meetups with them and compare your performance.
A little fun competition can drive amazing results.
Tip #12: Create an infinite bank for yourself
Losing a loved one is not only an emotional loss but can also be a financial loss, especially if that person happens to be one of the family’s primary providers. A loss like that can result in much more of a burden to the family.
I believe no one plans to leave his/her family in debt. Therefore, buying a dividend-paying whole life insurance plan from a mutual life insurance company does not only protect your family in the event of your untimely death, but also allows you to make withdrawals of up to 90% of the cash value of your plan at any time without having to worry about being denied. This way, you will have an infinite bank at your family’s disposal.
There is no secret to success, but there is a system that works. The same is true for financial freedom, setting yourself up with a system (or plan) that gives you control, flexibility, and liquidity. The infinite banking concept gives you all of these, plus it gives you the added advantage of your investments compounding in value over time. Even when you make withdrawals, as long as the policy is properly structured, you can continue to earn the same rate of return (ROR) as if you hadn’t taken out any of the money, which is subject to minimum taxation.
With so many expenses waiting to sneak up on you, your best line of defence is to have a plan in place, which can be done by creating a budget and sticking to it, no matter what stage of life you are in.
Let's dazzle in our finances by having and sticking to a budget.
Asha Gilliam is a mompreneur, author, educator, and oatmeal raisin cookie lover dedicated to helping mothers become the mom they once dreamed they’d be to their children. After a near-death experience, she was forced to relocate and rebuild her family’s life. It was during that time that she was aligned with a mentor that helped her understand the importance of valuing herself, her time and the significance of setting higher standards for her family than what she had come to settle for.
Asha’s goal is to inspire moms to become the victor of their life's story instead of continuing to be the victim of their circumstances. She created a unique concept of M.E.O (Mommy Executive Officer). In addition to being the MEO of her family, Asha is also the CEO of the Expanding with Asha, LLC. Expanding with Asha, LLC was built to serve Moms by showing them what’s possible by taking back control of their lives.
To learn more about Asha Gilliam’s works and interests, visit www.ashagilliam.com.