Being a mom is a rewarding and fulfilling job, but it also comes with its fair share of financial responsibilities. From groceries to school fees, diapers to family vacations, managing a household budget can be a challenging task. However, with the right approach and some practical tips, you can create a budget that allows you to provide for your family's needs while saving for the future. In this blog, we'll tackle that first topic introduced in last week's "Smart Money Moves.." and guide you through the process of creating a budget that's both effective and mom-friendly.
*Also note how these tips can also work greatly for that side business you're running to help bring an income in for the household.
Step 1: Set Clear Goals
Before diving into the nitty-gritty of budgeting, it's essential to define your financial goals. Consider both short-term and long-term objectives. Short-term goals might include saving for a family vacation or paying off credit card debt, while long-term goals could involve saving for your child's education or retirement. Having these goals in mind will provide you with the motivation to stick to your budget. What the goal is, ultimately doesn't matter, as long as it makes sense to you and provides motivation.
Step 2: Calculate Your Monthly Income
To create an effective budget, you need to know how much money you have coming in each month. This includes your salary, your partner's income, any side hustles, and any other sources of income -- don't forget to include payments from the government (ie child credit) and dividend payments from investments/interest made on savings, unless you are just rolling them back into savings/investment. It all adds up. Make sure to use your net income (after taxes and deductions) rather than your gross income of course.
Step 3: Track Your Expenses
Now comes the critical part – tracking your expenses. Start by listing all your monthly expenditures. Categorize them into fixed expenses (like rent or mortgage, utilities, and insurance) and variable expenses (such as groceries, entertainment, and dining out). Don't forget to include irregular expenses like annual subscriptions or maintenance costs. I suggest pulling your banking info for this and categorizing every transaction. You may think you're only spending $50 on coffee per month, yet you may actually be spending over $100 per month on it. So verify by going over bank and credit card statements.
Step 4: Create Categories and Allocate Funds
Once you have a clear picture of your income and expenses, it's time to create categories for your spending. Allocate a portion of your income to each category, prioritizing essential expenses first. Fixed expenses should come first, followed by savings and then discretionary spending categories.
I now do this part with various bank accounts. However, back in my 20s, when I was learning to budget, I used the envelop method. That's where I made an envelop for each category and put the appropriate cash for each in them. Cash served as a great training tool because I could physically see it, allowing me to be more aware of whether or not I was staying on budget.
Step 5: Cut Unnecessary Expenses
Review your variable expenses and identify areas where you can cut back. For instance, cooking at home rather than dining out can save a significant amount. Making that iced coffee at home is easy and cost effective. Also, consider cancelling unused subscriptions (meaning if you haven't watched Netflix in 2 months and don't intend to at the moment, cancel it. You can always re-subscribe at a later time) or finding more budget-friendly alternatives for your entertainment.
Step 6: Emergency Fund and Savings
Incorporate an emergency fund into your budget. Aim to save at least three to six months' worth of living expenses in case of unexpected financial setbacks. Additionally, allocate a portion of your income to long-term savings, such as retirement accounts or college funds for your children.
A personal rule I have with this one is to put money into the emergency fund before allocating funds to entertainment or shopping.
Step 7: Use Budgeting Tools
There are various budgeting apps and tools available that can simplify the budgeting process. Tools like YNAB (You Need A Budget), or Personal Capital can help you track your spending, set financial goals, and stay on top of your budget effortlessly.
As mentioned last week, here are a few free ones:
Spreadsheet (for anyone): Google Sheets
Smartphone app: Mint
Canadian budget planner: Canada Gov
Step 8: Regularly Review and Adjust Your Budget
Budgeting is not a one-and-done task. Life changes, and so should your budget. Regularly review your spending and make adjustments as necessary. If you get a raise or a bonus, consider allocating some of that extra income towards your financial goals.
Step 9: Involve the Family
Budgeting is a family affair. Involve your partner if you have one and, if age-appropriate, your children in discussions about budgeting and financial goals. This will help create a sense of responsibility and teamwork when it comes to managing money.
Creating and maintaining a budget as a mom may seem daunting, but it's a crucial step towards securing your family's financial future. By setting clear goals, tracking your income and expenses, cutting unnecessary costs, and using budgeting tools, you can achieve financial stability while still providing for your loved ones. Remember, budgeting is a dynamic process that requires regular attention, so stay flexible and adapt as your family's needs change. With determination and discipline, you can master the art of budgeting and ensure a brighter financial future for your family.
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