A family budget is a must if you want to get everyone on the same page when it comes to money. When you involve all family members in the family budget meeting, chances are it will be much easier to stick to. Wondering how to plan an effective family budget? Then keep reading. We will share some tips on how to plan a foolproof budget plan.
What is a family budget?
It is simply what you want to do with your family’s money. It reflects your goals and values; it is an understanding of income and expenses, so you can prioritize where your money needs to go.
A budget plan should include your kids. It is essential for them to understand the value of a good budget. Also, you should make the plan simple and understandable.
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How to make an effective budget
We will explore some tips on how you can create a working budget plan for the family.
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Invite all of them
Often times, the bread earners of the family decide what the priorities are and lift the entire burden of budgeting on their shoulders. This is not an effective way to deal with money within the family. You should include all the family members, from toddlers to teens, and discuss the budget plan; make them understand what is important and how a good plan today will support the future as well. At the same time, listen to what your kids have to say about the plan; keep an open mind; it is always helpful. A plan that includes everyone has a better chance of being successful.
Breakdown your priorities
Once you’ve gathered together, it is time to break down your budget plan into categories such as: expenses (both fixed and variable), debts, savings, and goals. Doing this will give everyone a clear idea of how a family budget works and how each of you can individually participate to make it a success.
Fixed expenses are recurring monthly expenses like rent, bills, education fees and other expenses. You can bring your kids into the conversation and solicit their feedback. You should also inform them how much your family needs for monthly expenses.
Your grocery and entertainment bills are part of the variable expense list. Eating out and medical expenses are also part of the same list. Though everything is not in your hands, you can still ask every member to contribute in their own way and help to bring down the monthly variable expenses.
Debts are your financial reality, and you don’t have to hide them from your kids. Your credit card bills, loans, and EMIs are all part of your budget, and you should be willing to discuss them with your children.
Savings may include emergency funds, retirement funds, and savings for other goals. It is your job to explain to your kids why you are saving today for your family’s future.
You can also create a savings game for your kids. Ask them to set a goal and save for it every month. In the meantime, you can open a secondary savings account and deposit the money your kids are saving every month into that account.
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This will create the habit of saving in your kids, which will help them in the long run.
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Choose a plan that suits your needs
One size fits all idea will not work here. Your family budget is your personal journey. It is ideal to ask every member about their individual goals and then decide on your family budget. Often times, we forget to include individual requirements and goals in the family budget. This is not a productive way of budgeting and chances are such a plan will not succeed.
Start planning today
A family budget is not a one-time thing; it is an ever changing thing, and all the members should be in line to discuss the family budget once every month. One good practice is to review your successes and failures and accordingly plan the future budget.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.