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How to Budget for Family Living Expenses

This article was originally printed in the April issue of the Plain Dirt Newsletter. Budgets might be tough to stay with at the beginning, but just think about how rewarding it will  be in the long run. We are happy to assist you with making a budget plan that fits your wants and needs. Contact us today 888.339.3334.

By: Andrew Stutzman, Loan Officer

Do you keep a budget for your family’s living expenses? It takes time and discipline, but the benefits are enormously valuable. Not enough families take the time to budget and track their spending, and many end up paying the cost. If you don’t do it already, here are a few reasons to keep a budget and track what you spend.

  1. You’ll spend less

By creating family living budget goals and then tracking your actual expenses, you tend to spend less overall. Closing your eyes and spending aimlessly without keeping track will almost always lead to greater spending. You’ll save on living costs and have more to save towards longer term financial goals.

  1. You’ll worry less

You don’t have to worry about where all the money is going because you know where it’s going. At the end of each month you can look at the total amount you spent, compare it to your budget goal, and sleep soundly knowing that you’re on track. If you notice you overspent, you can come up with a plan for making up the difference next month. Having an achievable plan reduces stress.

  1. It will help you plan

It’s hard to plan for your financial future if you don’t know what you spend now. By creating spending and savings goals, you can predict your yearly financial progress. If you’re struggling to make ends meet or not making as much progress as you had hoped, knowing your budget will make it easier to problem solve and to make adjustments. It will show you where you’re doing ok and also where you need to buckle down and cut costs.

If you earn a steady wage income, you can set and know how much you can expect to save in a year. If your income varies (you have your own business/ farm operation), you’ll know how much you have to make each year to cover your living costs.

I talked to a farmer who calculated the amount of money his family needs each month to cover living expenses. Each month, no matter how much money the farm operation makes, he writes a check in that amount from his farm account to his family’s personal account. Knowing the exact amount of his living draw each month helps him plan financially for his farm operation. A consistent, modest draw ensures that no more stress will be placed on the farm operation than necessary. I know another dairy farmer who set up automatic withdrawals to transfer $200 twice a month from his checking account to a savings account. Each withdrawal is set to transfer a week after his milk check is deposited. Knowing his numbers and managing his living expenses has enabled him to make that commitment to consistently saving.

  1. It’s freeing

Maybe you’re afraid that having a budget will be too constricting. Actually, many find that having a budget is actually freeing. When you have a budget line for each category of expense, you can spend in each of those categories without feeling guilty, knowing that you can spend the budgeted amount and still be on track for your long term financial goals. If you don’t have a budget, each time you spend money you have to wonder if you’ve gone too far, which can actually make life more stressful.

  1. Reduce family conflict

Money is often the issue that brings the most conflict between a husband and wife. A budget can be a great communication tool in this area. By tracking expenses and creating a budget, husband and wife can have a conversation together to determine an appropriate budget amount to set for each category. Then as long as each sticks to those commitments, nobody has to say to the other, “Why did you buy that? We don’t have money for that!” Rather, each has the freedom to spend up to the budget amount in each category, having already received the approval of the spouse when the budget was created.

No better time than now to start budgeting

If you don’t do this already, maybe it’s time to consider starting a family living expense budget. If you’re new to this, start by tracking your family living expenses for a few months to get an idea of what you spend in each category. Then sit down as a couple and discuss an appropriate budget amount to set for each category going forward. Continue to track your expenses in each of those categories, comparing your actual results to what you had budgeted. Below is an example list of categories. Each family, however, should customize categories specific to their situation.

  • Groceries/Dry Goods
  • Clothing
  • House Rent or Mortgage Payment (if this is included in your farm or business rent, adjust accordingly)
  • Propane/Gas
  • Kerosene/Coal
  • Utilities
  • Taxi
  • Shoeing/Carriage Repair/Hay for Driving Horses
  • Medical
  • Tithe/Offering/Charity
  • Entertainment
  • Vacation
  • Miscellaneous (items that don’t fit any of the other categories – there are usually more here than you’d think!)

We thought it would be interesting to poll our readers on what their average living expenses are. If you have been tracking your living expenses and would like to help out, comment below what other expenses you feel are important to account for. Thanks for your help!