It Doesn’t Have to Hurt
The following is a guest blog post:
Jane Kight of St. Andrews, Scotland, wanted to be a stay-at-home Mum (SAHM) when her oldest son, Jack, was born. That’s not a small feat to manage on a military family’s income. Now expecting her second child in October, Jane says one of the keys to success has been budgeting. “Following a budget has really allowed me to know exactly what we can and can’t afford and still be a SAHM,” she says. “We’ve really managed to live off a lot less than we ever thought was possible!”
Keeping a budget can help other families achieve their dreams as well, and the first step has nothing to do with numbers or money.
James Lewis is a customer services agent for SimplePayday.co.uk, an emergency loan business in London. He regularly deals with family budgeting as part of the financial planning process with clients applying for payday loans. “The first step for individuals and families is to stop and think,” he says. “What is it that they want to do? Or achieve? In other words, what are their goals and when would they like to achieve them?”
Lewis suggests thinking through what you want in the next six months, the next one to five years and beyond. For example, the Kight family obviously had a goal for the next few years to have Jane be a stay-at-home Mum.
Understanding your goals is critical to budgeting success, says Lewis. “Without this goal setting or the motivation behind the process, budgeting just won’t work or won’t work for very long,” he says. As anyone who has ever tried a budget knows, motivation can be lacking. Knowing where you are headed with your budget is the key to starting a successful budgeting habit. Budgeting becomes a tool to make your goals happen.
Once you have a sense of why you want to budget in the first place, it could be to cover cash emergencies or simply because you need to in order to afford something, you can start with the basic steps. Keeping a budget doesn’t have to be painfully complicated. Some people use computer programs and fairly sophisticated accounting systems, but budgeting can be done in much simpler ways. There are two basic elements to budgeting: tracking where your money is going and determining how to spend it more wisely.
Tracking Your Money
Amy Mauel, of Sidcup, New Malden. is her family’s official budgeter. Her tracking system is fairly basic – literally on the back of an envelope. “I keep a list of all of our bills, including the due dates,” she says. “I also keep a list of when my husband and I get paid. These are hung up at my computer desk. As soon as a bill comes in, I write the check and get it ready to go. On the back of the envelope, I write the date that the bill is due. When my payday is falling that month, how much I’ll have, I keep a piece of paper on top of the stack of bills to keep track of the running total. I keep all the bills together in a specific place so I can mail them out on payday.” The important thing about Mauel’s system is that it works for her.
“Having a good understanding of how much money is coming in and how much is going out is the first step to budgeting,” says Lewis.
Spending smarter is a process of figuring out where you spend your money each month and how you might save in those areas. Here are some practical tips from Mums on how to do just that:
- Groceries – This is a big ticket item in most family budgets and one that we have more control over than we often think. “I’ve helped my grocery budget by always going with a list, shopping once a month, and now we even write on the calendar what we’re having for dinner each night of the month before we go to the store,” says Kight. “It’s flexible, of course, but I always know that I’ll have the ingredients for whatever we’re having that month. Just going from bi-weekly to monthly has cut our grocery budget in half, with another short trip the middle of the month for milk, bread, etc. – the small stuff.” Mauel also says that keeping a list is central to keeping grocery spending under control. “I buy only what is on the list unless I see something that it is an absolute necessity,” she says. That probably helps with family weight control too, eliminating all those impulse purchases of ice cream and chocolate muffins!
- Child Necessities – There are basic monthly expenses that come with having children, and Kight recommends thinking ahead, not just shopping for your immediate needs. “I’ve figured out about how many pull-ups we go through each month, and I buy every payday, whether I need them that minute or not,” she says. “We’ve never had an emergency where we had to run to the store in the middle of the night because I ran out – they’re just always here!” Plus, when you really need those middle-of-the-night diapers, they’re not likely to be on sale. This might sound a little tedious, but both mums think it is well worth it. “When we spend smart on things that we need, we are able to have more left over to do fun things,” says Mauel.
Beyond the Basics
Once you have a sense of where you spend your money and have taken some basic steps to spend it more wisely, the experts encourage a more long-term view of budgeting. Saving for a rainy day and having emergency cash ready for that is obviously the aim. This allows your budget to evolve as your family changes and to use budgeting to help you achieve more of your long-term goals.
Our experts offer these tips:
- Review your budget – “It’s important to re-evaluate your budget on a regular basis,” says Lewis. “We do ours quarterly, as our income and expenses are always changing.” Your family needs may be changing too, and taking a look at your budget every so often will prevent it from becoming obsolete.
- Review your goals – Kight recommends periodically reviewing your goals as well as your budget. This lets you keep your budget in line with your life goals, and it also gives you a reminder about why you are budgeting in the first place.
- Plan monthly for bigger expenses – “It’s also critical to plan for the unexpected expenses (i.e. car repairs, medical bills, etc.) and annual expenses like taxes and insurance,” says Lewis. “When you have a good budget in place, you can set aside a little money each month for these extra expenses and not be blown away when they happen, leading you to lean on loans or credit for example further exposing you.”
In case you need just a little more incentive, think about all the benefits you can reap. Mauel spends money on fun stuff instead of groceries she didn’t really need, Lewis gets to see clients make progress toward achieving major life goals, and Kight is able to stay at home with her children. Pretty good results for trying a simple family budget.