How to Set a Smart Budget & Savings Plan: A Guide for Families
Good budgeting is the key to avoiding debt, saving up cash for the future and, most importantly, ensuring you have a financial safety net should an emergency occur.
But budgeting is easier said than done—especially when you’re busy juggling all the tasks (and expenses) that daily life throws at you.
Do you need help creating your budget and staying on track? These tips make it easy.
Household Budgeting 101
To get started, have your after-tax income ready—what you make each month after taxes are removed from your paycheck. Be sure to include any additional income in there, too (child support, freelance work or side gigs).
Then, use the 50-30-20 method to break down your individual budgets. Fifty percent of your income should go to necessities (housing, food, gas, etc.), 30 percent toward your wants and nice-to-haves, and 20 percent toward savings and future goals (or repaying debts if necessary).
Once you’ve worked out these figures:
- Use the right tools to stay on track – There are dozens of apps and tools you can use to track your budget, including Mvelopes, Mint, Digit, and more. Use these to categorize your expenses and monitor your spending in each category. You should also configure alerts when you’re getting close to your budget max for the month.
- Get everyone on board – Make sure your entire household is aware of the budget and its limitations. Give them all (anyone who has spending capabilities at least) visibility into the budget and tracking tools, and plan to have a monthly recap meeting to go over successes, failures, and areas for improvement.
- Automate your savings and debt payments – To keep your savings and financial safety net healthy, consider automating your savings. Set up direct deposits from your paycheck, if possible, or at the very least, set yourself a monthly reminder to deposit your savings manually. If you have debts, you should also automate these payments and work on paying down the highest-interest account first.
- Reassess regularly – Are you often exceeding your budget in one key area? See if there are places you can cut back. If not, see if you can adjust other category budgets to give yourself some more wiggle room. You also may need to reassess your budget if you’re setting a new financial goal like saving up for a vacation. Use your monthly household meetings to address these concerns and any others that might crop up.
Don’t let the idea of budgeting overwhelm you. Simply categorize your budgets, determine what apps and tracking systems work for you, and stick to it. Remember that your budget is an evolving strategy and it should change as your household’s financial needs and goals change, too. If you ever need help setting or managing your budget, speak to a banker in your area for guidance.
Need more help setting your budget? Try one of these helpful resources:
- Why Most Budgets Fail
- 18 Budgeting Tips to Make Money Management Easy
- Five Ways to Make the Budget Goal a Reality This Year
- How to Cut Your Expenses
- Budget Wizard
- New to Budgeting? Why You Should Try the 50-20-30 Rule (July 11, 2016). Retrieved from https://www.forbes.com/sites/trulia/2016/07/11/new-to-budgeting-why-you-should-try-the-50-20-30-rule/#2698dd8432e9
- Arielle O’shea and Lauren Schwahn (May 31, 2019). The 7 Best Budget Apps and Personal Finance Tools for 2019. Retrieved from https://www.nerdwallet.com/blog/finance/budgeting-saving-tools/
- How to Automate Your Finances and Save Money (February 13, 2017). Retrieved from https://www.nerdwallet.com/blog/banking/make-saving-money-automatic/