When you have a family, financial management becomes all the more important. You want to make sure that you always have a roof over your kids’ heads, food in their stomach and enough put aside for a rainy day or fun activities for them. Poor financial management can result in a lower quality of life for your little ones. You don’t want bailiffs showing up at the door and repossessing their belongings or constant moves from one place to another cheaper place as you try to get yourself out of debt. The good news is that there are various things that you can do to manage your family’s finances effectively. Here are some to consider!
Create a Budget
The first important step you can take when it comes to managing your finances well is to come up with a proper budget. Everyone should live by a budget. It’s a tool that will allow you to pay all of your bills, avoid debt and to be fully aware of how much money you have available to spend or save. Here are some simple steps towards creating one of your own!
Work Out Your Total Income After Tax
First and foremost, you need to be aware of how much money you have available to you each month. All too many people assume that their salary is their income, but this ignores essential payments out of it before it even hits your bank account – such as tax and national insurance To figure out your total income after tax you will need to understand what tax bracket you fall into. The more money you earn, the more tax you pay off it. There are plenty of free to use online calculators that will figure out how much of your salary is dedicated to taxes and how much you actually take home to spend. Give them a try!
Covering the Necessities
The next step that you need to take is figuring out how much you need to put aside for necessities and bills that you need to pay each month. Some common necessities that people put money aside for include:
- Rent or mortgage payments
- Council tax
- Electric and / or gas payments
- Water bill payments
- Food shopping
- Car and car insurance payments
- Minimum payments for outstanding debt, such as loan or credit card payments
Total all of these things up and deduct it from your total take home pay.
Family’s finances – Your Disposable Income
Once you’ve deducted tax and essential payments from your pay, you will be left with a sum. This sum is what is known as your disposable income. Your disposable income is the money that you have left over to spend as you please throughout the month. There are plenty of ways to spend your disposable income. You may want to pay bigger payments off existing debt. You might want to put it into savings for a larger purchase down the line. You might want to buy non essential or luxury goods. You might want to go out to places like the cinema, bars, restaurants, theme parks or more. Spend this however you please, just make sure that you don’t overspend, as this is when you start creeping into debt!
There are, of course, situations where debt is fine and can be managed properly. Some more expensive purchases in life may be better bought sooner rather than later – using a loan or credit card – and paid back in installments. For example, you may want to buy a car to get your kids to school and their chosen recreational clubs. You may want to renovate your home, splitting one large bedroom into two so your kids can have their own space. The important thing to bear in mind when borrowing for these big purchases is to borrow wisely. Use a loan calculator or check your potential credit card’s interest rates. This will give you a good idea of how much it will cost you overall to borrow this money.
Family’s finances – Save
While it can be tempting to always spend all of your disposable income on your family, saving really is a good idea. Having some funds to fall back on can really help you out of unexpected sticky situations. You never know when you might need to carry out a car repair, home repair, replace something that your children may have worn down, ripped or broken, or other costs.
Of course, there are countless professionals out there who can give you further advice if you are struggling with your family’s finances. But hopefully, some of the information above will help you to get things started out in the right direction!