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6 steps to building a successful household budget

Managing your family’s money can seem intimidating, but getting a better handle on your finances is actually more straightforward that it seems. The key to feeling confident about your household finances, is to create a household budget. A household budget can be an invaluable tool in lighting the way to a strong financial future. And the best part is–putting one together is easy thanks to the myriad of tools available online that do the hard work for you.

No matter what your family looks like or what stage of life you’re in, you can tailor a budget to your collective goals. “But don’t just set it and forget it,” says Jeffery Rho, Assistant Manager of Member Services at Coast Capital. “It’s important to understand that this is a document that you should be revisiting and adjusting as you go.”

Follow these six steps to creating a successful household budget that can move with you as your needs change:

1. Rethink what a budget means

For many people, the word “budget” is synonymous with a strict financial diet. But Ryan Guina, founder of Cash Money Life, encourages people to view budgets as a positive guide instead. “Instead of being restrictive,” Guina says, “a budget can be a helpful tool to show you how much you can spend without getting into trouble.”

And, with a budget in place, there’s no guesswork involved. Instead of wondering where your money’s going or if you have enough to meet your goals, your budget tells you clearly where you stand, says Guina. So you can choose priorities consciously and make informed choices for your family’s cash.

2. Get clear on your goals

When building a family budget, the first step is identifying exactly what you want to achieve with your money. For you, that might mean saving for your first home, planning for kids, caring for an elderly parent, building a college fund, investing for retirement, boosting your credit score, or celebrating a milestone.

Guina emphasizes the importance of getting on the same page as a household. “It’s essential to have open lines of communication within your family and have a clear understanding of your short-term and long-term goals,” he says.

Once you nail down the specifics of what you want, you’re ready to map out a course toward those goals.

3. Be realistic about your spending and circumstances

Rho knows that people sometimes slip into idealizing their finances. So they’ll under-budget for expenses, avoid planning for costs they’re likely to incur, or overstate the amount they plan to save.

Instead, he advises families to look at their relationship with money and their goals as they truly are. “Be realistic and honest with yourself,” he says, noting that an overly optimistic budget ultimately won’t help you.

And check in with your budget regularly, Rho adds. Even if it did fit you at one point, life brings changes that may require you to revisit and tweak your family’s financial plan. Whether those changes are internal (job change or large purchase) or external (pandemic or economic downturn) take a step back to consider the circumstances in order to rethink and renegotiate your budgeting terms.

4. Adopt a budget template

For many people, figuring out where to begin in creating a budget is the hardest part of the process. But you don’t need to start from scratch. Instead, use a simple, effective budget strategy that can give your finances structure in minutes.

Consider the 50:30:20 Rule. Here’s how it works:

Write down your monthly take-home pay. Now allocate that cash into three categories:

  • 50% for needs (rent, groceries, electricity, medical costs, credit card minimums)
  • 30% for wants (dinners out, streaming subscriptions, gifts, décor, vacations)
  • 20% for savings and debt (accelerated debt repayment, retirement, college savings)

Down the road, you can adjust your percentages or add more complexity to your spending plan. But, starting out simple is a great way to establish a quick framework for a new budget.

5. Prioritize an emergency fund

Odds are, you’ll need to make some choices in creating your budget, so you don’t find yourself over-committed and over-extended. But Guina asserts that an emergency fund is a definite must-have. “This will help you in the event of a major financial emergency such as job loss, major medical bill, or unexpected home or car repairs,” he says.

That reserve of cash—enough to replace three to nine months of your household expenses—can be a lifeline when the unexpected happens. Instead of busting your budget or turning to unnecessary debt, you can tap your emergency fund to cover surprise costs and keep your family on track financially.

In addition to your emergency fund, Guina recommends you and your family differentiate between needs and wants. List them out, along with the expected cost of each. Then make space for the necessities in your budget before seeing which nice-to-haves you can comfortably add in as well.

6. Take advantage of budgeting tools

When making and tracking your budget, you don’t have to do it alone. Tools like Coast Capital’s Money Manager shows you all your accounts—even those from other financial institutions—in one, convenient place. It can be accessed online or through the mobile app.

Money Manager creates a done-for-you budget built from details about your past spending. You can easily compare your monthly spending to your budget and analyze your expense categories. You can also set and track financial goals, create debt pay-off plans, and track your net worth month after month.

Be open to tapping expert advice along your budget journey

The road to financial health and security isn’t one you need to travel alone. Rho encourages members to visit Coast Capital’s Help Hub, which offers specialized information on managing and growing your money. And consider setting up a call with a financial professional. You’ll get a smart assessment of where you are, what you want to achieve, and how to get there.

Looking for more information on creating a budget? Connect with a Coast Capital advisor to build a customized financial plan for your family.

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