How to Manage Your Family Budget Like a Pro

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

Review and Categorize Past Spending

First, download your bank and credit card statements for the last 3-6 months–or as many months as you need to determine the average amount you’re spending each month (no less than 3 months).

From there, review each transaction and categorize it as a fixed expense, living expense, or savings:

Fixed expenses

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.

Living expenses

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.

Savings

Savings includes any investments and short-term and long-term savings plans you have established.

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 for Discretionary Spending and Fixed Expenses

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

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 for 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.)

Family Discretionary Spending or Living Expenses

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.

Individual Discretionary Spending (Optional)

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 period 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.

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.

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

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.

Her Money Podcast with Jean Chatzky

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

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!

Money Management Takeaways

Money management is important when you don’t have a family, but it’s especially important when you’ve got tiny humans to support. To make money management for your family as easy as possible, keep these key takeaways in mind:

Know where all of your money is going

The foundation to successfully managing your family’s budget is knowing where all of the money is going. Review your past spending and develop a budget to keep your family on track with your financial goals.

Look for creative ways to save

Be extra critical when reviewing your budget. Are you overspending on subscription services, gym memberships, or eating out? See if there are any creative ways to cut down in areas.

Separate & Automate

Use separate checking accounts for bills than savings or discretionary spending. Giving each category its own account and directly depositing the money into those accounts will put budgeting on auto-pilot and reduce overspending.

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