21 Apr 4 ways to get control of your family finances
As the prices of petrol, groceries, school fees, electricity and water all creep upward, families are under increasing pressure just to make ends meet.
So how can families cover the cost of everyday living and still manage to put some savings aside? One way they can get ahead is by treating their family finances like a business with assets, liabilities and cash flow as key indicators of financial health.
Budgeting is a crucial component of financial health. Many people have had a half-hearted attempt at budgeting or have started out with good intentions but then have given up. If this sounds like you, you’re certainly not alone. The fact is most Australians do not demonstrate sound behaviour with money. Australia has one of the highest rates of credit card debt in the world. Too many of us are borrowing to live day-to-day.
It takes determination and commitment to maintain a budget and avoid the traps of consumerism with all the marketing messages we are bombarded with everyday! The purchase of a new flat screen TV, a new lounge, a new car or another pair of shoes may seem essential but people who are financially successful don’t buy things until they can prove to themselves they can afford it. Their philosophy is “don’t spend more than you earn”. Look at Warren Buffet, business magnate, investor and philanthropist and most successful investor in the world. He still lives in the same house he purchased in Omaha in 1958 and pays himself a modest salary!
Variations in income and/or expenses are inevitable but they are often enough to dissuade people from having a serious go at budgeting effectively. It can all seem too hard.
So what are 4 steps you can take to get control of your family finances?
1. Know your incomings and outgoings
Knowing what your family earns in a given month should dictate what discretionary income can be spent in the subsequent month. Ideally expenditure should lag earnings.
2. Start saving
No matter how small the amount, having a regular savings program or having money automatically deducted from your account can make a real difference.
Just saving $35 a week ($5 per day) will grow to more than $5,700 after 3 years (assuming an interest rate of 4%). If you could save $100 a week, you would have more than $16,500 after 3 years.
3. Have achievable goals
Think of something you’d really like to change in your life and work as a team with your family to make it happen. It may be a weekend away, a holiday or a new piece of furniture but help the goal come to life by making it something specific. You may even decide to reward yourselves when you achieve particular milestones. It might be a dinner out when you reach a particular target. Just don’t be tempted to reward yourselves before you’ve done the hard work!
4. Schedule a regular household meeting
Successful businesses have regular team meetings to track their progress. This is no less important in the home. Have a regular conversation (ideally weekly) with your husband/wife/ partners and children to look at what money has come in and what money has gone out so far for the month. You could call it something like your ‘money in, money out meeting’.
BONUS – Useful tools
If you need help getting started with your budgeting these resources might work
- Moneysmart budget planner
- Tips for managing your credit card
- Compound interest calculator
- 20 easy ways to save money
There are some things in life that we have little control over so it’s liberating to make a conscious decision to change the things you can for the better. Today could be the beginning of a new financial life for you and your family!