For many families, running the household is like running a business. The family's CFO — also known as Mom or Dad — manages the day-to-day financial activities and tracks monthly spending and expenses. But all family members can play a role in helping save more and spend less.
Let's look at some family budgeting tips designed to help everybody work together to save money and find financial success.
Create a family budget
It's important to create a family budget. If you're like me, it's easier to make it than to live by it. But the only way to get ahead is to spend less than you earn, and a budget or spending plan helps you do that. The hard part is the discipline it takes to stick to the family plan.
Families should discuss their spending plan together. Even if you don't include your children until later, work on it as a couple. Otherwise, you might find that two people in the family are spending the same dollar and there isn't enough cash left at the end of the month.
Consider reading this article on finances in marriage. While it's mainly focused on engaged couples, you can use the lessons even after you've tied the knot.
Calculate your monthly income.
Creating your family budget starts with knowing your monthly income from all sources. This is how much you have to work with to reach the family's financial goals. We'll discuss these goals a little later.
Identify and categorize expenses.
USAA believes in starting with a 20/50/30 budget:
- 20% for savings and debt repayments
- 50% for needs
- 30% for wants
Once you've set up a spending plan, compare it to your actual spending. They won't match up, trust me. But the initial goal is to see where you spend your hard-earned dollars and then adjust the 20/50/30 budget based on your needs and desires.
Family budgeting tips
When it comes to budgeting, part of your 20% savings and debt repayment category will go toward your financial goals.
Set realistic financial goals.
How do you set realistic financial goals? First, don't limit the conversation. Just make a list of what you want to save for in the short and long term. Make sure it has how much you think each item will cost.
After you make your list, reality comes into play. Set realistic financial goals and timeframes based on your finances. If you have $200 left over each month, you're not going to magically save $6,000 over one summer. But you might save $800.
Priority of goals is also important. For example, it might take three years to save for your dream Hawaiian vacation. But in that same time, you could achieve three other goals. Only you can decide which goals to prioritize based on your budget and timeframe.
Also, long- and short-term goals can have different savings strategies. To learn more, check out this article about 4 steps to prioritize your savings goals.
Build your emergency fund.
If you had a sudden, unexpected expense — think a major car repair or week in the hospital — would it derail your savings and your budget? We all need an emergency fund. It's the core of our financial foundation. If you don't have one, make saving for one a priority. We define a full emergency fund as three to six months of living expenses.
But don't be discouraged if that feels like a large number. Set an initial goal of $1,000 then continue to save little by little. You'll get there over time. And you'll get the financial peace of mind that comes with an emergency fund. I'm often asked what's the best place to put your emergency fund. For most people, it's in a savings account.
Practical ways for families to save money
Saving money needs to be a family affair. When one person is saving and one person is spending, it can create conflict in the marriage or between kids and parents. Here are some ways to save money as a family.
Set a limit.
Set a limit, like $100 or $200, on how much the family can spend without discussing it first. If it goes over this amount, talk it over first. By holding off on the purchase and talking it over, you may be able to avoid an impulse buy you might later regret.
This also gives you time to think about how this purchase might affect your other family savings goals. That new pair of noise-canceling headphones might not seem as nice after realizing it could cost your family its planned visit to the local amusement park.
Teach kids to save.
One of the best things parents can do is pass down positive financial habits to their children. And when children understand what the family is working toward, they can better grasp why you say no to something.
They might start asking themselves, “Am I saving my family money?” If they can see how it impacts the family's goal, it may even lead to them not asking for an expensive item.
From teaching toddlers about money to helping teens understand taxes, there are things you can do to teach your children how to save.
Shop smart at grocery stores.
Budget-friendly meal planning is a touchy topic in my home. Let me give our family's example. We've decided to eat one meatless dinner per week at our home to help combat the rising cost of meat. This isn't difficult for my vegetarian readers, but I'm a meat lover, so it's a sacrifice. But it does help lower the grocery bill.
Here are some other tips on how to save money as a family. Plan out your meals, make a grocery list and stick to it. Focus your meal planning around items that have coupons or are on sale. Don't be afraid to change up a meal if you can take advantage of a great deal.
And while this might seem simple, don't grocery shop on an empty stomach. Yes, our moms told us this, but guess what, it works. When I'm hungry, I tend to buy things that look good in the moment but aren't on the list.
Finally, compare prices between grocery stores. Whenever we moved to a new place, which was often when we were active duty, we'd make a list of items bought in a normal week. Then we went to three local grocery stores and added up the cost for each item to find out which store was cheapest. Often, we had a main grocery store but visited the others when they had something that was cheaper or not at our main store.
Use energy-efficient home practices.
Families can also save money by focusing on their utility bills. Living in Texas, I understand how the AC can impact a family budget in the hot summer months. If I lower my thermostat from 75 to 70, my bill is going to soar and affect our ability to save for other goals. My fellow Americans in the northern states feel this pinch in winter.
Before you adjust the thermostat, ask yourself, “Am I saving my family money?” Maybe you can throw on a sweater or wrap up in a blanket in the winter or turn on a fan to cool off in the summer.
Thrifty entertainment ideas
We'd all like to take a yearly vacation to a tropical beach or exciting foreign city, but it's just not feasible for most of us. We all have limited income and must make tradeoffs to meet our financial goals. That's why thrifty entertainment ideas are key.
Now, the word “thrifty” depends on what you're comparing. For example, I could buy a season pass to my local amusement park for my family for about $450. That's still a lot but doesn't even come close to the cost of airfare for a European trip. Plus, a park pass offers fun that can last all year long.
Other relatively cheap ideas include visiting local museums, going camping or even being a tourist in your own town for a day. These can help you avoid extra costs like airfare and hotels and are easy ways to save money without sacrificing fun.
If you're planning a vacation, make sure you keep your family budget in mind. Look for discounted airfare and tickets through organizations like your installation's MWR Ticket and Travel office or USAA Perks®. I'm a firm believer in not paying more for the same experience.
I hope these money saving tips can be a steppingstone to reaching your family's goals and continuing down the path to financial security. But remember, planning is only the first step. You really don't get closer to achieving your goals without taking action.
Ready to start saving for your financial future?
The first step is often through a USAA Savings account.