blog

You Don't Need a Family Budget

Take this first step instead

by Rob Bertman, CFA, CFP® in Budgeting, Spending
October 6, 2019

You Don’t Need a Family Budget – Take This First Step

Have you ever been off the workout wagon for a little bit then try to go all in on your first time back?

Have you ever been off the workout wagon for a little bit then try to go all in on your first time back?

I remember the last time I did that.

It had been about 6 months since I last did any type of activity resembling working out. If you were at the fitness center that day, you would have seen me confidently hopping on the treadmill getting ready to do some intense interval training. What ended up happening was far from what anyone at the gym would call “intense”. 

First came the warm up of fast-paced walking. No problem! I got this!

Then it was time to up the speed. I started pushing the button to go faster. The treadmill beeped with every 0.1 mph increase. I was headed up from 4.0 to 8.6 where I was planning to stay for 1 minute before bringing the speed back down, ready to complete my first of 15 intervals.

About 10 seconds in I was huffing and puffing and felt like my legs were on fire. Was it fatigue or did I actually injure something? I was supposed to do 15 of these intervals! What would I do if I couldn’t get my full work out in? I needed to get back in shape!

The reality is that I wasn’t ready to jump right in and that I could actually end up worse off than before I got there. I remember struggling with the idea of scaling back my expectations for my workout that day. I knew it would take time to work myself back up to where I was before and where I wanted to be, but I just wanted to be right back in shape right now!

The more I thought about though, scaling back to realistic expectations while making progress was the right move. So I decided to do a brisk walk on a higher incline to get my heart rate going and get a good sweat without damaging my body.

45 minutes later, I had walked 3 miles and burned over 500 calories…and I wasn’t limping out of the gym. I consider that a victory. 

Later that day, I developed a plan to get back to where I was. But this time, I was a progression that would build over time rather than trying to jump in with unrealistic expectations.

Sometimes it’s best to start with the easiest step that will help you make progress vs trying to do the extreme and have the wheels fall off.

Budgeting is Hard 

Let’s be honest. Budgeting doesn’t work for most people. Yet, we all feel we should be able to jump right in and master it even if it’s been a while or we’ve never tried it together as a couple.

Budgeting is rigid and restrictive. It requires consistent attention and someone who is either wired for it or has been “working out” to make it happen. Even so, most couples need to work at it because both are probably not on the same page when it comes to spending or budgeting.

My wife Anna and I tried budgeting. She’s extremely organized, is great with numbers and is very practical. Me? Well…let’s just say I can be a little impulsive.

I’m the kind of person who is well-intentioned but often get in my own way.  For example, I wake up every morning wanting to eat as well as I can. But then I have a bite of a cookie and figure I might as well scrap my healthy eating since I already ruined the perfect day.  So I just go for it. Anna doesn’t operate like I do.

This is another way that budgeting fails most people. Once we spend more than our budgeted amount, we just figure the whole month is ruined so we can give up and start fresh next month.

Budgets can often get busted especially with kiddos.

Budgeting for Parents is a Challenge

Now for those of us who have kids, we need to add in the seemingly unpredictable nature of supporting them.

Daycare expenses? They’re easy to predict because they’re consistent. The seasonal things like sports, activities, and camp seem to always surprise us. Then you add in the occasional hospital visit for stitches, x-rays, scary sounding colds in the winter and the good stuff like birthday parties and holiday presents. It seems like every month, something crazy comes up that breaks the budget.

We start off the month well-intentioned, but then bills and expenses just seem to come out of nowhere. Darn it! We were really hoping to have a month with no surprises! Oh well. We’ll try again next month…

The reality is that parents like us can find a pattern with these so-called “unexpected” expenses. But if we start by building a budget, we are doomed to fail.

The Biggest Budgeting Mistake Parents Make

If you’re trying to get your finances in order and start with budgeting, it can be a big mistake. It’s just like me jumping on the treadmill after 6 months off and expecting to have a perfect workout.

The biggest mistake parents make is that they start with very little awareness of how much is going out each month. How can anyone make a budget without knowing the lifestyle they’re currently living? 

Case in point, I worked with a couple who drastically underestimated what they were spending each month. The budget showed the mostly consistent stuff: mortgage, car payment, utilities, cell phone bill.

But then they showed me what they thought they spent on food, clothing and travel. The spending matched up nicely with their income, but they were going deeper and deeper into credit card debt each month.

Part of the process when I work with couples is to help them figure out where their money is going by looking at the actual numbers. When we went through the numbers together, they were actually overspending by $2,400 per month vs what was coming in. 

This happens very often when I work with couples. It was certainly the case for Anna and me before we started taking this kind of thing more seriously 10 years ago.

We set these crazy expectations for ourselves and simultaneously set ourselves up for failure which causes us to give up.

Parents start off trying to budget, then face the reality of having to cut their lifestyle to make the numbers work. It’s very challenging to start and causes couples to argue about where the cuts are going to come from. Most couples try, fail then give up or are intimidated and don’t start at all.

We need to walk before we run just like our kids. (Side note: This just made me remember the first steps my kids made. Remember when yours first started walking? How fun!).

The First Step to Create a Family Budget

The first step to create a family budget is (drum roll….) not to do a budget. 

The first step is to TRACK your spending FIRST. We all need to be aware of how much we’re spending and where our money is going. 

This is the step that will equip you with the knowledge you need to start on your journey of actually having money left over at the end of the month that can go to saving more money and paying back debt.

Then and only then will you have the information you need to start creating your family budget.

Walk before you run. Know where your money is going before setting your budget.

3 Steps to Track Your Spending

There’s no need to start off how I did…manually entering my transactions into a spreadsheet. That was long before the time of Google Sheets! There are a bunch of resources to help you today.

Honestly, you don’t need anything fancy to make this work but there are ways to make this easier. Here are the steps:

Step 1: Get all of your income and spending data into one place.

Most people have more than one account where money flows in and out. We have multiple credit cards and sometimes bank accounts.

The easiest thing is to use a budgeting app that can get all of your data in one place. I personally use Mint because it’s free and has a lot of information. Some people like YNAB or EveryDollar.

Mint pulls in data for the last 90 days, so you’ll immediately have access to look at your last 3 months of spending when you get started whether you want to look at it or not 🙂

After a 5 minute set up, you have 3 months of information to track. Awesome!

Step 2: Look at how much income you have each month vs family spending.

Are you spending more than you make, less than you make, or around what you make?

If you don’t know this number, you’re certainly not alone. Most clients I work with haven’t taken the time to look at everything all together or they do back of the envelope math that leaves out $1,000-3,000 per month of spending.

If you’re spending more than you make, you’re not alone either. 

Remember that these numbers are a look into the past and don’t have to represent where you go from here. The goal here is to empower you with the information to make positive changes going forward.

Step 3: Review your spending but don’t categorize it.

Now that you know what is coming in and going out as a whole, let’s see a little detail about where your money is actually going.

The thing is that looking at each individual transaction can be overwhelming and don’t give parents a picture of where most of their money is going. For example, when my family gets our Amazon Subscribe & Save items, Amazon shows up with individual transactions for each item. But how much have we spent at Amazon as a whole? Do we really want to know 🙂 Yes!

Mint is great for this. There’s a section called “Trends” where you can see graphically and in list form all of your spending. I like to look at “Spending by Merchant”. It will list out how much money has been spent at Amazon in one number. How about daycare? Yep. What about at Target or our favorite restaurant? Absolutely.

Now we know where the bulk of our money has gone over the last 3 months listed from largest to smallest.

OPTIONAL Step 4: Pick one (and ONLY one) traditional budgeting category to track.

Let’s say you feel like food spending is something you really want to get a handle on. How much are you actually spending in that category on a monthly basis? 

Go through your transactions and categorize only food. Start with the general category when you’re getting started. In Mint, it’s called “Food & Dining”. Don’t worry about groceries vs dining out in this step. 

Only take this step if you can confidently stop right with only one category. 

Don’t overwhelm yourself and have the wheels fall off with the whole process. Walk before your run, remember?

Wait at Least One Month to Create Your Family Budget

You’re just getting started on your workout plan.

You you have all your spending in one place, know how your spending compares to your take home pay and know where your money has gone over the last 3 months. 

Track your spending weekly for at least one month before attempting to create your family budget. Understand your spending patterns and habits. 

This is the first step to get your spending where you want it to be by finding more money to save and pay back debt.

How to Win with Your Family Budget

Families have so many obstacles that get in the way of maintaining a budget. The crazy expenses of raising kids and the shortage of time and energy we have to go through it really makes it tough. 

Plus, we aren’t always exactly on the same page as our spouse with this whole money thing, right? It’s often hard to work together on this kind of thing.

Most parents have the desire to be great with money, but they’re not sure how to come up with the money to meet their goals or have a productive conversation with their spouse.

My goal with Family Budget Expert is to help you get this figured out. They’ll be plenty of material you can get for free on my site. I also work as a professional speaker to get the word out and help people in person.

The most effective way parents have gotten results has been by meeting directly with me as a budget consultant either in person or via video chat.  Most couples I work with have found $1,000 – $2,000 per month that they can sustainable cut out without feeling like they’re making a big sacrifice AND while working together as teammates rather than rivals.

I’d love to hear the challenges you’re facing when it comes to spending/budgeting and figure out the best way to help you. 

Right now, you can set up a complimentary (aka free) 30 minute discovery session with me. By the end of the call, I’ll be able to give you some key takeaways to improve your specific situation so you can finally save money and pay back debt.

Find a time that works for you and book your complimentary 30 minute discovery session here.

I look forward to hearing from you and helping you as best I can.

Leave a Reply

Your email address will not be published. Required fields are marked *