Want to improve how you manage your personal finances? Consider planning a household budget to track the income and expenses of each family member.
First of all, you need to know what's coming in and what's going out of the household. Start by tracking what you spend over a three-month period and compiling all your bills in a spreadsheet. Even the few dollars spent on a small treat must be noted so you don't miss anything. Do the same with your income: your salary, of course, but don't overlook tax refunds, interests, support payments and the like.
After a few months, you'll have a realistic idea of the money coming in and the money going out.
You might be in for a few surprises, for example hundreds of dollars spent per month on eating out. If the balance of your income and expenses is in the black, that's good news. If it's in the red, you need to make some cuts to balance your household budget.
Draw up a list of your essential expenses such as rent, electricity, monthly car payments, tuition fees for your children and paying off your debt. Next, note down your non-essential expenses (magazines, eating out or going to the movies, etc.). Allocate a monthly amount to each expense. Also set aside an amount for unexpected expenses, and another for savings. You can use budget templates available for free online.
If your planned expenses exceed your income, you must cut your spending or reduce some of your expenses. However, if your monthly income exceeds your total expenses, you're in a good position to save the surplus to reach your goals.
Don't forget to check in with your budget each month. This will show you whether you're able to stay within your budget or need to make adjustments. A budget you can't stick to is useless!
The arrival of a baby has a significant impact on budgets: diapers, clothing and daycare will increase household expenses, while parents' incomes normally drop during parental leave. A child can cost anywhere between $3,000 to $4,500 per year, according to a 2013 Fraser Institute survey.
Moreover, don't overlook daily living purchases. While diapers can cost up to $2,700 per year and infant formula can set you back anywhere between $1,000 to $3,000, daycare remains one of the highest expenses, costing up to $10,000 per year and per child. These amounts must be factored into the household budget. You may need to make cuts elsewhere and carry higher balances to ensure that you make ends meet.
The most successful families are those that turn to friends and family for assistance and buy second hand items for their kids such as cribs, changing tables and clothing.
It's also wise to start saving for higher education from the time your child is born by arranging for automatic payments into a Registered Education Savings Plan (RESP). The government will match up to 30% of your contributions, making the RESP one of the most profitable investments available!
Before picking up the hammer and drill, it's better to plan a renovations budget. The amount to be set aside will vary depending on the renovations to be done. A kitchen usually costs between 10% to 15% of the value of the home, while the bathroom will cost between 5% and 10%. For example, for a house valued at $250,000, a new kitchen will require from $25,000 to $37,500.
It's possible to borrow at a low rate to finance renovation work. You'll need to factor the loan repayment into your budget once the work is complete. However, you could save money by carrying out some minor work yourself!
Family trips are golden but also very expensive. This is why it's necessary to budget them.
For instance, you could put aside a certain amount towards your next vacation. There's a good incentive to save every day!
Start preparing your family vacations a few months ahead. This will afford you the time to compare the various accommodation options and choose activities based on their cost, allowing you to stay within the budget you set for the trip.
Renting a small apartment or a room with a kitchenette is often more expensive, but it's a nice way to cut your vacation costs. Eating at home instead of having each meal in a restaurant will lead to huge savings in the end.
The main expenses to consider when planning your family vacation include: transportation costs (fuel, parking, flight tickets, bus tickets when you get to your destination), food (groceries, restaurant meals), activities (outdoor and indoor), plus a small amount for unexpected treats (a souvenir or a round of ice cream, for instance).
Having children often means having to deal with the unexpected; with a well planned budget, you can ensure you don't exceed your household expenses. And should you feel like making a trip to Europe or repairing the roof, you'll be able to cover the cost without a problem.
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