It might not be a particularly thrilling prospect but taking stock of your finances is an important part of life. And starting or raising a family is often one of those times when you stop to think about your finances and reprioritise your spending and goals. The good news is that you’ll feel far more in control if you’ve got a financial roadmap in place.
Australian Unity’s Head of Finance, Banking, Vipin Bhatia, says the earlier you start budgeting, the better off you’re likely to be financially.
“Whether you’re paying off a mortgage, planning a holiday or just want to better understand how you’re spending your money, a budget can guide you into winning financial habits that can last a lifetime,” Vipin says.
Budgeting is particularly important once you start a family. “There’s no hiding from the fact that the household budget takes a hit once kids come along, particularly if one parent decides to take time out of the workforce,” Vipin says. “Careful budgeting can make a big difference to enjoying this period of your life.”
The big expense parents will need to consider is education, which can vary greatly based on your decision to opt for private or public schooling, and how many children you have. Budgeting for education early on — for example, by creating a regular account to sink funds into — can take the sting out of school fees when the time eventually comes. Don’t forget to include school uniforms, books and computer devices, and stationery into your budget. It all adds up.
Another item to consider is your child’s activities and sport, which can eat up a large proportion of the budget, especially if you have a more than one child.
Along with education and activities, here is a list of other items you might consider in your family budget: (please make bullet points two column layout if possible)
While life can be expensive at times, don’t lose sight of the fact that your income is there to be enjoyed. “Saving isn’t just about stashing money away for eternity. It’s about setting a savings goal and once you reach that, setting a new goal. Budgeting, on the other hand, is all about finding the right balance for you,” Vipin says.
Having a household budget in place can help you understand where your money is going and find better ways to manage your income. The big-picture items to consider include:
Here some strategies to help you get started.
1. Work out your income
Knowing exactly how much your household brings in every month is an obvious but important first step. Start by writing down your wage (including your partner’s wage if you are a couple) and add it to any other income, such as government benefits, side hustles or income from investments, such as rental income on an investment property.
2. Add up expenses
Sit down and work out your regular bills. This should include mortgage or rental costs, utilities, loans, clothes, entertainment and even that daily caffeine fix. If it’s a regular or recurring expense, make sure you capture it.
If you’re unsure what you are spending in a typical month, keep your receipts for 30 days so you can take stock of exactly where your money goes. Some people like to track their expenses through an app on their phone, such as Expensify or Squirrel Street; others use an Excel spreadsheet or old-school pen and paper.
One last tip: go through your bank statements to highlight all those hidden monthly costs, such as subscriptions you no longer use or small direct debits you may have forgotten about. These can add up over the course of a year, so reviewing them and getting rid of the ones you don’t use provides an instant savings boost.
3. Compare income and costs
Next, compare your outgoings with your incomings. This will allow you to see what’s left at the end of every month. If you’re spending more than you’re earning, the budgeting process is going to be transformative for you.
4. Set some financial goals
Once it’s all laid out in front of you and you’ve made the earth-shattering realisation that your family eats out more often than you realise, it’s time to set some goals.
Start by looking at how much you can comfortably reduce your spending without too much change to the lifestyle you enjoy. Then, make some decisions about what you’re prepared to forego in a bid to improve your finances.
You can organise your goals by order of priority, such as: (please make bullet points two column layout if possible)
It’s a good idea to get the whole family involved in your savings goals, so that everyone’s on the same page. That way saving for that holiday becomes a family affair.
5. Create your family budget
Now that you understand your expenses, you can start making the decisions that will determine the most appropriate budget for your family.
You can map out your budget in an exercise book, a spreadsheet or a budgeting app like Pocketbook, MoneyBrilliant or MoneyTree; setting up separate bank accounts for each expense bucket is another handy way to keep track.
When working out your budget, consider isolating regular small amounts in a separate account. This slush fund can be very handy if you need to make a sudden purchase that’s not in the budget—for example, if you discover that your child unexpectedly needs braces, or you need to take an unforeseen interstate trip. It provides a safety buffer for that non-emergency, yet real-life occurrence.
Your budget can also be an opportunity to help your kids learn good money habits. Rather than being coerced into impulse purchases by the younger members of your family, plan for these expenditures with your child and ask them to wait until you’ve saved up for the purchase — this prudent approach helps you stay within your budget while also teaching children about better financial management.
The economic crisis on the back of the COVID-19 pandemic will likely change the way we think about financial stability. As Vipin explains: “It might be hard for some to hear, but the fact is that people who have the discipline to save will manage economically challenging times a lot better than those without that discipline in place.”
They say everything changes when you have kids, and how you manage the family budget is no exception — it too needs to adapt to reflect your new household needs.