American families have a tendency to live beyond their means. According to a study by USA Today the average US household now carries around $137,000 in debt, whilst the median household income is significantly lower than this, at around $59,000 a year.
This is partly driven by rapidly increasing living costs, but it’s also down to a widespread lack of knowledge about proper budgeting, something that can feel especially challenging when you’re raising a family. Everyone has the power to stay in control of their finances, as long as they can budget like a pro.
Budgeting successfully is about so much more than just buying store-brand items or skipping Friday night dinner; it’s about keeping track of every penny you spend and changing your habits so that your outgoings are sustainable.
There’s no reason why a family can’t save up whilst still enjoying a fulfilling life. If you’re wanting to get your household finances back on track, read on to find out how to create a household budget you can actually stick to.
Creating a Household Budget
1. Become a Spreadsheet Ninja
Every savvy budgeting mom will be intimately familiar with Microsoft Excel spreadsheets. There may be hundreds of different budgeting apps and platforms out there, but few things are more effective than seeing your ingoings and outgoings in black and white on a spreadsheet.
Setting one up is easy and there are plenty of helpful guides to get you on track. Making sure you keep updating your spreadsheet will keep you vividly aware of your finances at all times, which is the ultimate way to sustainable spending.
2. Know How Much You Should Be Spending
It can be difficult to even know if you’re spending too much if you have no idea what the norm is. Fortunately, there are plenty of authoritative studies which show just how much of your income should be devoted to certain areas if you want to live a solvent and prosperous life.
There are tons to choose from but one of the best out there is the report commissioned by the Credit Counselling Society, which breaks down everything your average US household should be spending. Basically, housing is your biggest expense, with 35% of total income being a safe limit for spending on rent, mortgages, property taxes etc.
Food bills should come to no more than 15-20% of your spending, while utilities, clothing, and medical bills should not top 5%. You should also try and squirrel away 5% of your household income every month as savings.
3. When It Comes to Fun, Freebies Are Your Friend
You and your family are entitled to enjoy the fruits of your hard work. You can still enjoy all of the shopping, vacations, entertainment, and activities you want, as long as you’re savvy with how you pay for it. Discounts and bonus offers should be your prerequisite before any recreational spending; hit up sites like Groupon and Coupofy to see how you can save tons of money on your favorite activities.
This can be applied to every area of your recreational time. It’s no secret that stay-at-home moms are partial to a spot of online casino gaming. However, there’s no need to spend big chunks of money on this activity either.
You can play your favorite online games for free just by hunting out the right bonuses, with comparison sites like Oddschecker posting helpful reviews of leading casino sites where you can claim rewards in the form of free spins and sign-up offers. It pays to do a little research.
4. Make Your Money Work for You
Once you’ve got your budgeting down, the next step is to maximize your income. The worst sin you can commit is just letting your money sit there in a low-interest bank account when a little bit of wise investment could see that nest egg grow without you doing anything.
As a bare minimum, your household should be investing in a 401K, which is undoubtedly one of the safest places to park your money and watch the numbers grow. Make sure to consult a financial planner about investment opportunities.
Avoid high-risk, high-reward vehicles and opt for low-risk ones that promise slow but steady returns over the years, such as Target -Date Funds (also known as lifecycle funds). The ROI might be slow at first, but you’ll be substantially better-off a few years down the line.
And now you know how to budget like a true pro. Follow these steps to get your household budget back on track and ensure a comfortable and stable future for you and your family.
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