Are you budgeting for the first time? Creating and maintaining a budget can feel overwhelming, especially if you’re tracking your entire family’s finances. However, a budget can keep your family from defaulting on bills and making tough sacrifices.
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Here are money management expert Dave Ramsey’s top six budgeting tips to help families avoid disaster.
Use a Budgeting App
Manually updating a spreadsheet isn’t always fun. This is why Ramsey suggested using a budgeting app.
You input your income and expenses, and it does the work for you — many can even link to your bank accounts, credit cards and other financial accounts, so data automatically flows into the app, giving you a comprehensive dashboard filled with graphs and charts to help you understand your spending.
Transparency in your spending is critical to avoid disaster.
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Set Up Monthly Meetings
Next, Ramsey suggested talking to your family about money. This keeps everyone involved and on the same page.
For example, maybe your spouse has a planned trip that you forgot about, so you need to increase spending on the travel category, or your pet has a vet visit. Setting up monthly meetings infuses clarity into your family’s finances.
Track Progress
Budgets designed to avoid disasters aren’t a set-it-and-forget-it strategy. In fact, your budget progress should be tracked throughout the month. This gives you the ability to adjust categories for unexpected events, such as a health insurance bill coming in or a spontaneous meal out.
Tracking your progress allows you to move categories around, so your overall spending stays within reasonable limits to avoid overdrafting your accounts or spending more than you can afford.
Ramsey pointed out that a budgeting app can be helpful here, as well.
Create Joint Money Goals
Family budgets are meant to be inclusive. If your spouse isn’t on board with the budget, you won’t see very much progress. Ramsey suggested talking through your shared goals and making them happen together.
Creating joint monthly goals helps everyone stay motivated and on track. For example, maybe your spouse wants to set aside $100 each month for an upcoming vacation, while you want to save for a new pair of shoes. By combining your money goals, you have a support system to fall back on when budgeting gets tough.
Prioritize Needs Versus Wants
Can you list ten different things you want? Now, list ten things you need. There’s a difference between needs and wants, and, Ramsey wrote, “Needs come first.”
Failure to differentiate between needs and wants can send your finances into a spiral. When creating your family budget, be sure to prioritize needs and not wants. Although you can work a few wants into your budget, your focus should be on your needs.
Limit Activities and Excursions
It’s easy to adopt a “treat yourself” mentality, but what is the true impact on your budget? You probably don’t have enough money for your kids to be involved in every after-school activity or to get take-out five days a week.
Ramsey suggested limiting kids’ activities to one per season for each kid — this frees up some of their time for family and friends, as well. By limiting activities and excursions, you prioritize what truly matters.
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Sources
- Ramsey Solutions, “How to Create a Family Budget.”
This article originally appeared on GOBankingRates.com: Dave Ramsey’s Top 6 Budgeting Tips To Help Families Avoid Disaster
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