Tuesday 20 March 2018

Easy steps to keep your family budget on track

When it comes to making a family budget, expect the unexpected and plan for it. That way, you'll rarely be stuck, says Sinead Ryan

Family fortunes depend on good financial planning.
Family fortunes depend on good financial planning.

If you arrived skidding into the end of 2015 with money burning a hole in your pocket, you can do things differently in 2016 to make sure the same stressful finances aren't repeated. It's all about planning and budgeting. It might sound boring, but it can quickly become not just a habit, but a fun one!

Most people simply run out of money at the end of the month and think they have no choice. Acknowledging your outgoings, understanding them and re-organising them can make all the difference. It is the unexpected that usually catches us out. The broken dishwasher, the emergency dental visit, an unplanned trip you have to take. Having money set aside to plot out even what you don't think will happen makes life easier when it does.

While we can all account for our weekly spending (i.e. groceries, petrol), and we may be able to remember some monthly outgoings (insurance premiums, mortgage), we can get a little fuzzy with items which are less frequent, such as back to school, birthday costs, NCT tests, bin charges and the TV licence. They creep up on us and we end up scrambling.

So, a budget planner is where you start, like the one I've prepared (and which I use!). The first thing to realise is that it's organic. Unlike the Government, which sets the country's budget on one single day in October, most families realise life isn't that simple. Things change; circumstances vary and so should your budget. So, use it as a template, rather than a rule. Don't beat yourself up if it needs to be changed along the way; keeping it as accurate as possible is the key.

Start your budget planner with expenses you definitely know - those that are fixed, by direct debit or a bank. Add in those you can easily estimate - your weekly food shop, bus ticket or petrol fill.

Estimate others with actual experience, by keeping receipts for a few weeks and write those down.

Then, with the less frequent spenders, such as those which appear once a year, it's important to budget for them as you go. This means something as simple as setting up separate deposit accounts for different expenses. If you have online banking, this is not only simple, but free. There is no charge for a savings account and most banks allow you to "Name" the account. I have several, for example, such as:

Q Car Account (this is medium term savings for my next car, started just after I bought my current one).

Q Holiday Account (for my main summer holiday and, hopefully, a weekend break treat).

Q Household Account (this one looks after things like Christmas costs, back to school expenses, doctors' and dentists' visits and things like annual bills for TV licence, Resident's Association fees and a contingency if something breaks or needs repair).

Start up a Prize Bond fund and buy as many as you can afford. They cost €6.25 each and have the benefit of needing to be held for a minimum of three months before cashing in; a great discipline. Savings should form part of your spending, not be something you do with 'spare' money.

The best way to start is add up all these expenses from your planner and divide by 12 (or 52 if that's how you're paid). That's the amount you need to put by. But for many, that's simply not affordable, so another way is to work out how much you can afford each month and split it between your named accounts. Even if it's only €20, it's better that frittering away that amount on things you won't remember. Pay these accounts on pay day, when you have money.

Naming the accounts has a helpful psychological impact: taking from one to feed another requires a conscious decision which is surprisingly hard to make. Are you prepared to delay the change of car to go on a holiday now?

Finally, do include a little for luxuries - we live in a family, not an economic unit. It's important to be able to eat out occasionally, go to a movie, or theatre. But budget for it and you'll enjoy it all the more!

Irish Independent

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