When you have a family, there's a good chance that money is never far from your mind, even if your financial footing is solid – and especially if it's not. No matter what your status, the objective of a family budget is to reduce stress and save money by taking control of your finances.
Family budgeting helps avoid conflict, identify waste, reach your financial goals, prepare for major life changes and teach your children financial responsibility.
Avoid Family Conflict
Finances are a common source of conflict between couples, often because their spending styles differ or they're at odds over managing debt. Creating a budget starts you on the same page by giving you an objective view of how much money is coming in and how much is going out. Knowing where you stand is the first step toward reaching an agreement about how to manage your finances with the resources at hand.
Identify Unnecessary Costs
Knowing exactly where your money is going helps you identify opportunities to reign in costs. It's not just about the price of coffeehouse coffee, lunches out and too-frequent shopping sprees. A family budget is particularly helpful in uncovering more insidious waste, such as a cable TV package you rarely watch or a landline phone no one uses.
Reach Financial Goals
It takes careful planning to achieve financial goals. Your family budget can get you there faster by helping you see your current situation in a new context. For example, your goal may be to eliminate credit card debt by a certain date. Success likely depends on you figuring out how much you need to pay each month, then reprioritizing spending to free up the extra money.
Longer-term goals, such as target retirement savings, may depend even more on a budget. It's easy to put off saving for an event that's years away, but each delay puts the goal a little further out of reach.
Prepare for Major Life Changes
Adaptability is the key to riding out major changes to your family's finances, whether they're planned changes such as your children's education or unplanned ones such as job loss. These events usually require changes in spending habits – changes you'll be prepared to make if you already know exactly what you're earning and what you're spending.
Teach Children Financial Responsibility
Children learn by doing and by example, so it's important to make them part of the process. The lessons they learn about earning and managing money will make them more conscious of their spending behavior now and help them build wealth as adults.