Lifestyle, Money Smarts

5 Budgeting Ideas For a Typical Family

There’s no end when it comes to budgeting. There are always new ways and methods to budgeting for a family. Each family is also different, so a budgeting method might work for one family but not for others. And sometimes budgets are affected by whatever is happening in the world in the most unexpected ways.

I have always been interested in this topic and want to help families with their budgeting problems. Although I can’t guarantee that my budgeting ideas will work, I am sure that these ideas could give you a general idea of what you should do.

Well, without further ado, here are my budgeting ideas for a typical family.

Create clear and quantifiable budgeting goals

Sometimes people can get carried away when creating a budget. Such as being unrealistic or outright ridiculous. This kind of budget plan can make your situation even worse, thus should be avoided.

Instead, create an achievable financial goal that is appropriate to your situation and could motivate you to keep sticking with the plan. And a realistic goal will not overwhelm you with ridiculous expectations.

To do that though you need to look again into your plans or ideal scenarios. For example, if your plan is to get rich, then you should change it to having a net worth of $X,XXX,XXX. Something vague as “I want my family to live a comfortable life”, should be changed to “I want to have a saving of $XX,XXX, for my child’s college education.”

Use different bank accounts

It is very easy to lose control of your life savings and use the majority of them. If you’re afraid of this happening, the best solution is to create another bank account for your daily expenses. You can create more bank accounts if you want to.

The breakdown is like this: one bank account for your life savings, one bank account for your daily expenses, and one more bank account for your monthly income. Live savings or other savings goals can be about your car, rent, bills, school or college, etc. Set a minimum amount of money to be saved each month and keep track of your progress.

Daily expenses should be simple enough. This account should be the only one you use when you’re going out shopping. Withdraw your money from the bank account whenever you need the money. Now for the monthly income bank account, it is very useful to help you to keep track of how much money you have after you put it into your daily expenses and savings account.

Don’t spend more than 20% of your monthly income on entertainment

Nowadays, it is easy to bleed money due to subscriptions. It is common for people to lost track of how many subscriptions they’re paying each month. And this kind of phenomenon is detrimental to your financial situation.

It is recommended to spend less than 20% on entertainment, hobbies, shopping, and other luxuries. This rule is designed to keep you from overspending. Non-essentials shouldn’t cost more than 20% of your income, even better if it’s lower than 10%. But everyone is different, and if you can spend less, why not?

Spend no more than 50% of income on necessities

Okay, so we have 20% for entertainment, what’s next? Well, don’t spend more than 50% of your income on necessities. Necessities are things like your kid’s education, groceries, bills, house payments, transport, and home and vehicle maintenance.

In some cases, 50% should be way more than enough on necessities, otherwise, spend as much you need and save the rest. And please don’t cheat by thinking that shopping, golf lessons, alcohol, etc. are necessities.

The remaining 30% for savings and investments

Finally, the remaining 30% of your income can now be used for savings and other investments. Of course, if you can get away with it, feel free to save more than 30% of your income. Anything like emergency savings, investments, and insurance should be considered as savings and investments.

But don’t just dump your money and forget about it. Keep track of each kind of savings that you’re doing all the time. Sometimes, it’s best to create a new kind of savings depending on your goals and situation.

Keep improving your budgeting skills and be financially independent

Reaching financial independence is the key to your family’s comfort. By reaching your goals bit by bit, you’re creating a better future for your entire family. And budgeting is the key to reach your goals. Keep improving, and soon you won’t have any financial problems ever.