Tips on Setting Budget Goals for Families

Time To Read 3 MIN READ

Tips on Setting Budget Goals for Families

budget goals for families

Creating a budget is no one's idea of a fun evening -- you'd probably rather go to the movies. But a properly planned and executed budget just might increase the number of movies you take in, and do a whole lot more to improve your life besides. When you set budget goals, you and your family are actually setting life goals -- the ability to pay for tuition, vacations, and a family home can all affect your life and your lifestyle. A budget is an important tool for making your goals come true.

Organize the Facts

The first step in creating a budget is deciding how you'll maintain it. For very little money, you can own financial management software that automates the process and helps catch errors. Most importantly, budgeting software lets you make changes quickly and easily look at "what-if" scenarios. You can create budget categories for your fixed and discretionary spending, and set up subcategories within discretionary spending, from drug store items to shoes to European trips. Set up your starting budget with estimates based on previous experience. You can begin setting goals once you have a handle on your discretionary spending, because only then can you determine and perhaps change your rate of saving.

Pay Off Debt

The interest you pay on debt drains money away from other uses, like saving for your goals. Families that make digging out of debt their top goal can end up with more discretionary spending as they retire old credit card bills, student loans and other debts that prevent them from saving and investing. Michael Taillard, a professor of economics at Bellevue University in Bellevue, Nebraska, has this advice: "If you can, work to pay off all your debt -- except your mortgage -- as quickly as possible by paying more than the minimum payments each month, even if it means skimping in other areas for a while. Interest payments make you shell out more for your stuff than it's really worth, and the interest rates (especially on credit cards) can jump on you for no reason at all, creating a serious financial hazard. Start with your highest-rate debt first and get rid of it as quickly as possible, then move on to the next highest rate, and so forth until you re getting the most value out of your expenses." If you need help climbing out of debt, ethical credit counseling organizations, such as the National Foundation for Credit Counseling, might give you the boost you need.

Prioritize Your Goals

Each family decides what is most important to them. For example, a family with children might place education expenses as a top goal, whereas couples without children or empty nesters might opt for other goals. Your goals reflect your interests, needs, ages and income level. A prioritized goal list usually descends from must-haves -- like saving up for the kids' tuition -- to dreams, like buying a vacation home in Hawaii. Make a goal schedule featuring cost estimates and, if applicable, deadlines for each goal. Once your goals are set, it's time to match them with reality.

Keeping It Real

You will need to verify that you are saving enough money to reach your goals by the deadlines you set. In any event, you might have to adjust priorities or deadlines to match your resources -- especially if any of your circumstances change. A raise or a job loss typically calls for a reassessment. As the months go by, you can review your actual spending against your budget and make further adjustments. Tracking your budget and comparing it with actual expenses is a great way to test the realism of your estimates and to help maintain your spending discipline. By carefully choosing your goals, controlling spending and increasing savings, your family can achieve its most important objectives.