Do you find it difficult to save now that you have a family, or are you worried that you’re not saving enough? We’ve all been there at one point or another, especially with all of the uncertainty that surrounds the pandemic. This post breaks down the most helpful money management tips for families, so you can ensure your family is as safe as can be for whatever comes up.
6 Helpful Money Management Tips for Families
Determine Your Financial Priorities
Depending on which financial expert you like to follow (I have personally loved Jean Chatzky for ages), they may recommend prioritizing your financial goals differently. For example, some say to work on paying down your debt as the number one priority, others say you need to establish a 6-month emergency fund before paying down any debt. The truth is, everyone’s situation is different so it’s up to you to determine what makes the most sense for your circumstances.
That said, the first step to understanding your financial situation is by developing a budget. I’m a numbers girl, so I LOVE a good budget. (My husband can vouch that ours is complete with pivot tables and pie charts. #nerd, I know). I was brought up in a house where financial responsibility was drilled into our brains, and understanding where all of your money is going is the most important aspect of that responsibility. It’ll open your eyes to exactly where you can cut back on certain spending and where you can afford to save a little bit extra, depending on your personal goals.
Evaluate Past Spending
Warning: this part is tedious! You will need to download your bank and credit card statements for the last 3-6 months–or as many as you need to give you a good idea of the average amount you’re spending each month (I recommend at least 3 months).
From there, you want to go through each transaction (I told you this was the tedious part), and identify whether the transaction was a fixed expense, living expense, or saving.
The expenses that you have every month that does not change. Fixed expenses include things like rent or mortgage, utility payments, student and car loans, insurance, and cable/internet bills.
Once you’ve finished recording your fixed expenses, ensure that you’re prioritizing saving over discretionary spending. The amount you use for savings should be split between any investments, short-term and long-term savings plans you have established.
Your living expenses are the expenses that you must spend in order to live, but ones that vary in amount from month to month, or ones that you can control how much you spend. These types of expenses include things like groceries, gas, gym memberships, etc.
Make A Budget
Next, you’ll want to create a spreadsheet that outlines your planned budget, so you can use it set goals and keep yourself on track. I’ve created a budget template for you here to help you get started.
Create a line item for each of your monthly expenditures, and then categorize them as fixed, living, or saving. Once you have a list of all of your known spending, you can evaluate your budget for any areas that might need adjusting. In general, you’d like to see your spending breakdown as follows:
Fixed expenses – approximately 50% of your monthly income.
Savings – Aim for 20% of your monthly income.
Living expenses – roughly 30% of your monthly income.
If your current spending in one area is significantly out of alignment with the targets above, consider possible areas when you may be able to cut back. Are you spending a monthly fee on multiple streaming services? Can you choose your favorite and cancel the others? Do you pay for a gym membership that you haven’t been able to use as much as you’d hoped? Are you dining out multiple nights a week or getting coffee every day? Look for little changes that will add up over time. You can always readjust if your situation changes down the line.
Create Separate Checking Accounts
This one is a game-changer when it comes to sticking to your budget. When you are able to establish separate accounts based on uses, it’s really hard to overspend, and it keeps your spending much more organized.
I’m a huge proponent of keeping your fixed monthly bills in a separate account from your living expenses. Doing so ensures that you don’t overspend discretionary funds or you will [literally] run out of money. My idiot-proof method of budgeting is to establish the following checking accounts:
Bill Pay Account (Checking)
This is a checking account used for all fixed monthly expenses (mortgage, utility bills, cable/internet, etc.). I recommend having your paycheck direct deposited into this account, if that is an option to you.
(*Semi-annual Bill Pay – if you pay any bills on a semi-annual basis, my preference is to separate that from monthly expenses. Again, it just makes accounting very easy.)
Living Expenses (Checking)
This is a checking account used for necessary spending that supports the entire household for day-to-day/month-to-month operations. Things in this category would mostly be gas, groceries, toiletries, etc.
Discretionary Spending (Checking)
*If you’re married or in a relationship, this is a checking account used for personal discretionary spending. In our house, we refer to this as our “spending allowance”. I like to buy things for the house, and Arnie loves fantasy football. We have agreed on a set amount for each pay that we’re comfortable with using on ourselves. Having our own allowances still offers us some financial independence when most spending is combined.
Utilize auto-pay and direct deposit
If it’s an option for you, I highly recommend taking advantage of a direct deposit system. If possible, check with your employer about setting up multiple direct deposits to go to different accounts. If that is not something your employer offers, determine if your bank has a feature for scheduling automatic transfers between accounts.
Automatically depositing the budgeted amounts into the respective accounts each pay will prevent overspending.
Automating your deposits and your payments is a game-changer. It ensures the appropriate amounts are always available in a specific account–separate from any discretionary funds–and that you’re never late on payments. This eliminates any and all stress when it comes to paying your bills. You won’t even have to think about it!
Automatic payments/transfers and direct deposits shouldn’t only be applied to paying bills. You can also utilize them to set up transfers into your savings account. That way, you never even see it as “available.” Instead, it’s immediately out of sight/out of mind, which will allow your nest egg to grow over time. Even if you’re only able to save $50 or $100 a pay, at least start there. In the case of an emergency, you’ll at least have a small buffer to help you get through the setback.
Start Investing NOW
If you work for a company that offers a retirement plan with a company match, make sure that you are setting aside as much as your employer match. Otherwise, you’re walking away from free money and no one wants that! It can feel like there’s never a good time to start saving, especially with all of the expenses that come with kids, but the sooner you start, the better off you’ll be down the road. It’s so, so, so much harder to see your money grow when you wait until you’re in the middle of your career to start saving for retirement.
If you’re self-employed, there are still ways you can save on your own. Consider opening a SEP IRA, which is a retirement account for self-employed individuals.
If you don’t already have a financial advisor, consider finding someone you trust to help you begin planning for your future. Especially after the pandemic years, it feels more important than ever to ensure we’re setting ourselves up for the unexpected later in life.
Helpful Money Management Resources
There are some great money management tools out there to help you get and stay on track with your spending. Some of my favorites are below:
Mint is a free online money management software by Intuit that allows you to manage all of your accounts in one place. You can link your bank accounts, credit cards, investments, and loans all within their easy-to-use platform. They also offer periodic advice to help you meet your goals and stay on track with your budget. It’s a great resource to keep you organized.
Jean Chatzky is a longtime favorite wealth management advisor of mine. Her podcasts are focused specifically on money management for women, and she offers a ton of clear and actionable advice. I also recommend her book Women With Money if you have the time.
@Your.RichBFF on Instagram
Vivian is an ex-Wall Street trader who is bringing financial literacy to the masses one step at a time. She offers helpful tips on all things from investing, to getting a mortgage, to putting your money in a high-yield savings account. Follow her for consumable actionable financial tips.
Acorn is an investment tool that allows you to turn your spare change into investments. You can link your bank account to your Acorn account and it will automatically round up each transaction so that you can invest without feeling like it’s a huge burden–or possibly even noticing!
Hopefully those 6 tips on money management will help your family today! Having money set aside for a rainy day is especially important once you’ve got those little mouths to feed! Don’t forget to grab my FREE budget template while you’re here. Happy saving!