Creating and following a budget is the best way for a household to gain control of their finances and manage their debt. But, most people don’t know how to make a budget, much less follow one. The professionals at York Credit Services offer the following tips for creating a household budget that everyone will actually follow.
Before you ever create your household budget, track your family’s spending. If you don’t know how much you’re spending, you won’t know where your biggest expenses are and which costs you can cut out. For a month or two, have everyone in the house write down every penny they spend and what they spend it on.
This will be an eye-opening experience because most of us spend small amounts of money without really thinking about it. When you know where your money is going, you can start to set limits on your spending, which is exactly what a budget is intended to do.
Keep It Flexible
Most people fail at following a budget because they make it too rigid. They find a budgeting program that seems like a good idea at the time, but as soon as they make a mistake and go over budget, they tend to think they have ruined their budget so they might as well stop following it. Building flexibility into your budget will remove this psychological barrier to sticking with it.
This means that if someone goes over their allotted amount, it is not going to derail the plan. Include a “flexible fund” that everyone contributes to that will cover these overages and not make anyone feel like they’ve failed. Of course, you can’t have everyone dipping into this fund all the time, so setting limits is important.
Choose What Works For Each Person
One person in your family might like using a spreadsheet to track their spending, while another person might prefer keeping a handwritten ledger. They are more likely to stick to a budget if they’re able to keep track of their finances in a way that makes sense to them. As long as they can communicate about their spending when necessary, it really doesn’t matter how they do it.
Determine Non-Negotiables for Each Person
There are some expenses that are non-negotiables for everyone in the family, like the mortgage, groceries, car payments, etc. But, there are individual non-negotiables too. Allow each person in the family to have their own one or two non-negotiables that have to be included in the budget. This will give them a feeling of control over what is included in the budget and make it more likely that they will follow it.
Come Up With Creative Alternatives
No one likes to cut out expenses related to activities and items they really enjoy, but sometimes it’s necessary. One thing you can do to take out the sting of cutting expenses is to have the entire family come up with creative (cheaper) alternatives. For example, if you have to cut your vacation account, try coming up with less expensive vacation options that are just as fun.
Making a family budget can be extremely stressful, especially if you have to cut out a lot of expenses or need your family members to stick to strict spending limits. The tips given here can help ease that stress and make the process more palatable for everyone.