With so many of us dealing with the coronavirus pandemic (plus its financial consequences) and spending more time at home this year, there is a very good chance your family budget will be different. Our own budget had some big adjustments (transportation costs basically didn't go back to anything) as well as some minor changes (buying supplies and items around the house for projects).
Based on our money data, we have reevaluated some things and redirected money into other expenses and savings. In addition to making sure that you take care of the essentials and building your financial cushion, you also want to make sure that you include another key area in your budget – some debt free expenses.
Why Budgets Must Include Debt Free Spending
What exactly are debt-free expenses? And why should families consider this when planning their budget? Basically, it covers the cost that you enjoy. Every family has different ways of dealing with this money. It could be traveling, dining together, adding another pair of shoes to your collection or gadgets. With families grappling with so many choices and challenges, awareness of adequate self-sufficiency as part of the routine has increased. Families are now including this in their budgets.
The key to keeping these expenses guilt free is making them bring you joy without breaking the bank. These expenses are not frivolous. These can be meaningful purchases, such as supplies for a hobby like painting that enriches your life. Second, these expenses are planned ahead of time and built into your budget so you don't go into debt or disrupt your family's cash flow.
Why budgets usually fail
One of the reasons I think it makes sense to have a bit of fun on your budget is because it helps make your budget more sustainable. As? If I asked you what a budget is for, what would you say? Most tell me it's about keeping their expenses in check.
It makes sense to believe that for most families this is what this is about – restrictions. However, the best budgets I've ever seen are centered around the direction of money. I've interviewed families who have retired early or have worked off a lot of debt. What they had in common was that their budgets reflected their priorities and circumstances.
Before putting pen on paper (or tapping the app), they sat down and defined what goals they wanted to achieve. If you had to break down a budget, the three key areas are basically:
Pay your essential bills.
Build long-term financial stability.
Have the money now that you can use to enjoy.
Often times, the disagreements, arguments, and sometimes sabotage with budgets stem from friction when it comes to finding a balance between spending money with long-term stability and enjoyment. If you are saving too much time to save for the future, one or more of you in the family may start to get angry. Financial infidelity or setbacks in staying within budget can occur for many reasons. However, some spouses say that one reason is because the budget has absolutely no leeway for fun. If you only focus on the now when something shows up – hello 2020! – You no longer have a safety net.
For families with children, this is an additional source of stress that they do not need. I noticed that the families who had achieved their goals had found a way to balance things. You are saving for your long term goals and putting money aside to enjoy now. As? By revising their approach to their budgets.
Easy to use budget framework
Let's go back to the three main goals of any budget: We take care of the essentials, save for the future and spend for the present. Families that want to include all of these goals need a budget that can weave them together. If you are just starting out on a budget and are still trying to find a framework, the 50/20/30 budget is an easy base budget. It breaks your money down into these three main goals, with 50% going for necessary expenses, 20% for financial stability and prosperity, and 30% for discretionary or fun money.
Feel free to adjust the percentages to suit your circumstances, but for many families, this three-bucket approach is easy to set up and leaves room for them to enjoy some of their money now. Once you have that budget in place, you can move on to the next step – automating your money. We've been doing this for over a decade and it's been incredibly helpful. We have automated our bills with each paycheck and our savings and investments are planned monthly. When we take care of the necessary things first, we know that the expenses we make don't harm our expenses.
Stay up to date and your budget – the easy way
How do you make sure that you stay on track after you have a budget and some expenses without guilt? There are some wonderful options including money apps like Mint. You can keep track of your money without losing your mind as the apps pull this data from your accounts and give you an easy and clear way to see where your money is going. You can also use Mint to help track your goals, such as: B. Pay off debts or save for a home. With this information, you can always see how you are doing quickly and easily.
Another useful tool at Mint is how easy it is to set up notifications about specific expenses. So if you have $ 200 reserved for your "fun" account, Mint can notify you when your spending is nearing your limit. This way you can manage your money more proactively and in real time without having to worry about every single penny.
As you can see, with a little planning, you can be financially savvy and now having fun. I would like to get your thoughts – how are you going with your budget? What do you absolutely have to spend?
Elle Martinez (21 posts)
At Couple Money, Elle helps families achieve financial freedom by sharing tips on reducing debt, growing income, and building wealth. Learn to live on one income and have fun with the second.