Does your family seem to live from hand to mouth? Or are you wallowing deep in debt? Or perhaps you feel like you never have the money to buy the things you need. If any of these scenarios seem true for you, some financial management guidance might be just what you need.
Managing family finances well is not the most straightforward task. It requires plenty of discipline and financial literacy. Well, here are three tips to guide you on your journey to improving your money management skills.
Photo by Alexander Mils from Pexels
How to Manage Family Finances Correctly
1. Know Your Money
You cannot manage what you do not know. This is why the first step to becoming a good money manager is knowing how much money you make and how much you spend.
For the best results, be as detailed as possible during this exercise. Outline every source of your income and how much money it brings you. This includes things like your salary, investments, and profits from a business.
Next, list every expense you have to pay for. You can classify your expenditures into recurrent ones and irregular ones. The recurrent costs will most likely be necessities, such as food, mortgage, transport, and utility bills.
2. Create a Budget
After knowing your money, you then need to create a budget. A budget is a powerful tool that gives you control over your expenses. However, creating a budget is only half the battle; the other is having the discipline and willpower to stick by it.
When creating your budget, you want to classify your expenditures into three main categories: needs, wants, and emergencies.
With needs, there is no shortcut: you simply must spend money. You have to feed your family, for instance, or pay your rent. If you have an immigration issue, you need to hire a family immigration attorney. In your budget, therefore, you need to set aside money for your family’s needs.
Next, determine your wants. These are things you wish to have, but they are not necessities. For instance, you may want to vacation in an exotic place over the summer. Or you may want the latest sneakers on the market. With such items, you should save money towards buying or achieving them. Just be sure to work out a practical saving plan to avoid stressing yourself out.
You also need to set money aside for financial emergencies. What will you do if your car breaks down unexpectedly? What if, unfortunately, you lose your job? To safeguard your family against unforeseen expenses, you should have an emergency savings account. Experts advise that you save at least your current six months’ worth of living expenses. That way, should the worst happen, you will have something to fall back on.
3. Be Disciplined
With managing family finances, discipline is a must. Before you make a big, emotional purchase, take time to think your decision over. Give yourself at least 24 hours to ponder the pros and cons of your purchase. Determine whether or not you can afford it. If you are disciplined, you will follow a budget faithfully. This will ultimately lead to more financial success.
If you want to manage your family money well, you must have a strategy. A good starting point is by listing your income sources and your expenditures. You also need to create and follow a budget. Finally, be disciplined with your money. These steps will go a long way in making you a good money manager.