Setting up a family budget

Setting up a family budget - Ever-changing Life of a MumLet’s face it, budgeting isn’t much fun. But when you’re living on one income it’s kind of a necessity.

Before making the decision to walk away from my career to spend more time with my family, I crunched some serious numbers to figure out how we were going to drop one full time income.

Through that process, do you know what I discovered? That there’s actually something quite satisfying about seeing our money trail written down on paper or the screen and realising that it could be done. That there wasn’t any reason why we couldn’t live on one income, besides not wanting to.

After more than 10 years as a working mum, I’m extremely grateful that we are currently in a position to allow me to be a stay at home mum. But the change has brought along plenty of challenges.

Living on one income has involved a major change in mindset for our family … and it’s certainly a work in progress. If there is anything that living on one income has taught me, it’s questioning just how important particular purchases are compared against others. You really need to want to make it work.

I’ve had this blog post on the to do list for some time now. But in all honesty, I felt like I needed to ‘walk to talk’ for a while before I could start making suggestions to others interested in doing the same.

We have been using this budget since June 2014 and it has been going well. However, late last year I became a little slack with keeping an eye on my family’s budget. There was a lot going on in my family at the time and my focus was most definitely elsewhere. A few months on and it was really starting to show in our money stream, particularly in our credit card statement.

So a couple of weeks ago, I sat back down to re-analyse our budget. I figured that it should really be done at least once a year anyway.

On a very basic level it’s about writing down all of your income and all of your expenses and seeing what you have left in the end. If the figure isn’t looking good, then you need to look at where your money is going and either trim back on some of the unnecessary expenses by analysing what you’re willing to let go off to make it all work. Stay tuned for a future blog post on tips for cutting back expenses! Otherwise you need to consider ways to bring in some extra money.

Your income

First of all write down all of your regular income streams. Examples are:

  • Wages/salary
  • Any government benefits
  • Other regular income, such as freelance work, interest, etc.

Personally, I choose not to include anything I may possibly earn from freelance writing or blogging as this is not consistent enough. Instead, I consider this a lovely bonus and set this aside to help save for a holiday or something special we have been waiting to buy.

Your expenses

Then list every expense you regularly need to pay. We factor in everything from regular monthly expenses, like mobile phones and internet costs, to quarterly utility bills and annual insurance premiums, to medical or pharmacy costs, to pet care needs. You need to consider things like:

  • Mortgage/rent
  • Council rates
  • Electricity
  • Gas
  • Water
  • Home phone
  • Internet
  • Mobile phones
  • Car insurance
  • Home and contents insurance
  • Ambulance subscriptions
  • Other loans/credit cards
  • Personal savings
  • Hair and beauty
  • Medicines/pharmacy
  • Sports/gym
  • Pet care (vaccinations, annual registrations, etc)
  • Children’s sports/activities
  • Takeaway
  • Entertainment
  • Petrol
  • Road tolls
  • Car registration
  • Roadside car care
  • School fees.

The best thing is to be totally honest about where your money is going and account for every little thing … if you spend money on beer or wine each month, make sure you include it. If you buy a lot of take away coffees, write it down. The budget will only work for you if you willing to open your eyes and see where you money is actually being spent.

Surplus or deficit?

When this is all done, I tend to scrunch up my eyes and cross my fingers as I scroll down the screen to see whether we are left with a surplus or deficit. Luckily for us it has been a surplus, but when I first started budgeting it was a deficit and we needed to explore where we could make cut backs in our expenses to turn it around. I’ll have a future blog post on this soon.

Now that we have a surplus, we choose to use this money as optional personal spending money each month (as I already have money allocated in our budget for putting into savings). It tends to be split three ways between myself, my husband and other expenses (like birthday gifts; school expenses, such as excursions, lunch orders; children’s clothing, etc). It’s a choice to use this money each month and whatever is left gets put away as additional savings.

Putting aside money for future bills and expenses

For me, the key to living well on one income is setting aside money for future bills and expenses in advance. It’s about being prepared for what lies ahead. This is what caught me and my family out just recently when I stopped doing this for several months and then suddenly it seemed as though every bill we could possibly receive needed to be paid all at once – water, rates, electricity, gas, car registration, home insurance … you name it, it came! On top of that, our gas ducted heater broke down right when the weather was starting to cool down and needed to be fixed.

My husband gets paid monthly, so I use this pattern of payment to work out our budget and set aside this money, but you can just as easily work this out for fortnightly or weekly.

For any bills that come up less frequently than that (i.e. quarterly or annually), I set aside money each month to cover the cost of any of these expenses. That way I know I will have the money when these expenses do come up and don’t need to worry about having to live extremely tightly one month just because the electricity bill has to be paid. It makes life a much smoother ride month to month.

Need more help?

In the past I have set up my own spreadsheet, but I recently came across a great resource over at the Australian Securities and Investment Commissions’s Money Smart page – it’s a budget in Excel spreadsheet format which you can download and modify to your needs. It’s great because all of the Excel coding has been done for you, which makes it nice and easy to input all of your income and expenses and it can work out all of your totals for you, whether it be weekly, fortnightly, monthly or annually. I thought I was in heaven because it saved me so much time working out these sums on the calculator.

It also brought my attention to a free money tracker app – TrackMYSPEND – which I have just downloaded and started to use in conjunction with our new budget. Previously, I used to withdraw personal spending money as cash , but I honestly don’t get a chance to get to the ATM very often so I find this app is a great way to use my card but still keep track of my monthly spending limit.

I hope this helps you set up your own family budget as a first step for getting your finances on track. Stay tuned for more blog posts about how my family manages to live on one income. I’d love to hear how you go or if you have any other budgeting tips that I might be able to take on board.

Happy budgeting!

18 thoughts on “Setting up a family budget

  1. I found going onto a budget after never having one strangely satisfying too. It panicked me how much we used to “waste”, but I enjoyed ticking all the boxes and making note of what was being spent where. That said, I’ve been quite slack at tracking my expenses lately and this is a great reminder to get back into it! Thanks, Erika. x

  2. I’m going to check out the website and app, I’ve just been sitting down looking at our expenses and budget for the next 6 months as we try to cut back a little more with baby arriving. I agree with putting money aside for bills etc, I pay a little off our electricity, phone, gas and rates each week which means when the bills arrive they are usually in credit. I’m looking forward to reading the rest of your tips 🙂

  3. It’s a yucky feeling when there is a deficit isn’t there?
    I feel we’ve had an expensive few weeks and need to be a bit more disciplined at the moment. Sometimes life is just more costly than other times.

  4. Ah yes… I took a redundancy and left my government job a few years ago. I’m single so knew there’d be no other income until I found another job. But, I planned ahead and was able to downsize and not have a mortgage and have some time off. However… I didn’t count on how long it would take me to find a new job. I’d made a seachange and my new hometown has high unemployment and few opportunities. I have to admit there was a year or two that I really struggled. I have part-time work now that pays a pretty good wage (nothing like the fairly senior govt job I used to have though) so am getting by comfortably again.

  5. I did a family budget last year but really need to update it as I decided to take 12 months long service leave which means I’m now on half my usual income..and starting to notice it too! Will have to check out that app, thanks for the tip

  6. Hey Erika, I keep this sort of budget also. I’ve always tracked our spending, last year I set up different accounts for different expenses car, school, activities, clothes etc and then added the average monthly cost of each of these when we get paid. I have found this to be a great way to have the money ready and waiting for the bills. It’s a trade off as I guess that money could be in an offset account but I find it works better for me this way, the money goes where it is meant to go. With 4 kids the start of term accounts add up!

    And agree, sometimes life happens and you get a little loose with it all, sometimes you need that too. It’s definitely easier to get back on top of it when you have a system to work with.

    Looking forward to your tips.

  7. Funnily, I would budget like a boss when I was single. That’s gone to dust now with kids. I need to get back on track! Thanks for the resourceful links.

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