If home budgeting is so necessary, why do so few households do it? Why do so many families keep spending by the seat of their pants, and wonder at the end of the month why they have so little left over… if they have anything left at all? Why are more people getting into debt, and failing to climb out of the hole they’ve dug for themselves?
Debt and lack of preparedness for the future are just two of the financial demons you can exorcise from your family’s life if you can establish a household budget and stick to it. Creating a budget is the first step in taking full control of your spending, and achieving full financial freedom in the future. But making a budget—and more importantly, sticking to it—takes a little discipline, awareness of one’s spending habits, and a fair bit of sacrifice.
Here are five home budgeting habits that can make this necessary step feel like less of a burden and more like steps towards a brighter, more secure future.
1. Keep your budget simple.
Most families fail at budgeting because their budgets are either too complex, or their estimates are too unrealistic. If you want to keep doing this long term, ground your budget in simplicity and reality. Keep your budget items to a bare minimum. Faithfully keep track of every expense—if you end up periodically paying over budget for any category, adjust.
Once you have the essentials down pat, these don’t have to change unless your family’s life situation changes. “Having been married for almost 13 years, our budget is pretty much set in stone,” says Chie Gatchalian, a freelancer and stay-at-home mom to two kids. “There are very little changes, if there are any. The biggest change was brought about by our son’s [autism] diagnosis a year and a half ago. Now we spend a lot on therapy and had to lessen spending on other things.”
2. Anticipate your expenses.
When you’re just setting up your budget, get a feel of how much each line item fluctuates. You may be able to anticipate particular trends (for example, your electricity bill going up during summertime), so you know when to shift more money to that item.
Not everything can be predicted, so make sure your budget has a buffer for emergencies and unanticipated spending. Gatchalian estimates that “around 30 percent of our income is kept ‘liquid’ so it can be used anytime there is an emergency,” but your mileage may vary depending on your needs.
3. Pay in cash.
The credit card is a powerful tool, and like many powerful tools, it can be abused. Frequent use of the credit card unnecessarily increases your debt; it also frustrates the point of a budget, which is to keep track of your actual expenses.
“It’s like spending money you haven't earned yet and may not actually earn at all,” says Connie Veneracion, a stay-at-home mom and blogger better known as the “Sassy Lawyer”. Not that Connie avoids the plastic. “We use credit card to buy appliances on installment. So that’s how we use the credit card for household expenses.”
4. Ruthlessly eliminate the unnecessary.
Why buy DVDs when you can rent? Why buy branded and brand-new when buying second-hand for some items is acceptable? Take note of the mental blocks you have that force you to pay more than necessary for certain items—habit, loyalty, pride—and chuck them out of the window.
Veneracion chalks it up to simple living: “We stay away from non-essentials—we don't have things like country club memberships, we don't [go to the] spa, I don't do the parlor routine, I don't buy makeup or perfumes,” she explains. “We scoff at trends. Trends are for the bandwagon crowd and we're not part of that. So, it's not so hard to have enough for the real essentials.”
She is particularly suspicious of brands. “The only things where brand matters to us are computers and cameras.” Veneracion considers these tools of the trade, which should be saved up for, not casually purchased. For everything else, “we buy the best quality that we can get at the lowest possible price,” she explains.
5. Make sure everyone’s on the game plan.
When planning your budget, ask yourself: are you and your spouse on the same page? Sit down with your spouse to discuss what you want your budget to accomplish. If you both see eye to eye on the basic assumptions behind your budget, the future will be relatively free of acrimonious money debates.
Gatchalian got the money talk out of the way early. “We never had any arguments about budgeting and finances because we discussed ‘money matters’ even before we got married. We both considered it a priority.”
It helped that she and her husband agreed on a few key basic points beforehand: “We knew that as much as possible, we wanted to work with the assumption that there was only one person bringing in all the income,” she explained. “That way, we could streamline expenses and live simpler.”