The key component to a happy family is a functioning family budget. The key component to a family budget....well, there are many! How a family chooses to spend money can directly impact the level of stress they experience. Simple planning can help avoid budget pitfalls. The foundation on which you build your family's budget is entirely up to you, but the four key categories below should be a starting point for growing families and serve as a reminder for established families.
Living
Start with the bare essentials. It's important to ensure every family member's living expenses are covered before spending on anything else. These costs include healthcare, life insurance, monthly mortgage or rent payments, utilities, groceries and other essential items like clothing. Your family size, income, health, living arrangements and eating habits impact these expenses. A good rule of thumb is to allocate 50-60% of your budget to necessities.
Transportation
Maybe you super commute across state lines or carpool to ten different extracurricular activities weekly. Regardless, reliable transportation is a requirement for most families. It's important to factor in gas costs for school carpools, work or weekend activities into this budget. And don't forget air travel for important family milestones, car insurance and maintenance. On average, this consumes about 10-15% of a family's budget.
Savings & Investment
While this category is most often ignored, it's essential for the future of your family's long-term financial wealth. Consider an emergency fund, retirement account and a debt repayment plan when choosing how much to set aside each month. There's no telling what the future holds, so it's recommended to plan for the unexpected and save 10-20% of your income.
Fun Money
Always leave room for fun in your family budget. Extracurricular expenses, vacations, gifts, clothes, memberships and subscriptions, and home decor are some of the most common. They're what makes life worth living, after all!