Despite more positive news on the economic front, many families are still finding it a challenge to balance the household books. The costs of daily necessities such as food, energy, transport and childcare soon add up, never mind the added financial pressure of Christmas just around the corner. The key to avoiding mounting debt and ensuring a happy fiscal New Year is budgeting. Getting a handle on essential spending and finding ways to minimize additional costs is central to ensuring a financially sound festive period. The great news is that a well thought through budget isn’t just for Christmas – it’s the gift that keeps on giving all year round. Here we take a look at budgeting basics and some key areas of expenditure which should be included in all family money planning.
Under starters orders
The first step in compiling a budget is getting a clear picture of what is currently being spent. Pull out all the bills – rent, mortgage, insurance, loans, credit cards, and anything else that is relevant to your situation. Analyze receipts from regular purchases such as food, clothing and drug store items to work out an approximate cost per month. Once the outgoings are identified, do the same with income. Include all sources from paychecks to income earned through interest and other payments such as child support. Some countries such as the UK provide tax breaks and other benefits for families. If these are available in your area make sure you are maximizing the potential of these important income related measures. Putting together all this information may seem time consuming but it is absolutely essential. Once you have completed this stage you will be able to answer the fundamental question of family finance – are we spending more than we earn? If you are overspending, is the excess significant or minor? Working this out will inform the level of changes required and avoid a debt spiral developing.
Debt management
Most households have some form of ongoing debt such as mortgages, loans or credit cards. Sustaining these obligations can be a real drain on family finances so it’s worth examining whether there less expensive options available. If credit card debt is for example an issue find out whether a different card could reduce interest costs and make it possible to repay the overall amount more quickly. Also investigate consolidating existing debts into one loan amount, but make sure you are in a position to pay off what is owed. Professional debt management advice organizations, many of which provide their services free of charge, can work with you to build a debt management plan which takes account of all your current obligations.
Review household bills
Shopping around for energy, telecoms and insurance providers can really pay off and deliver an impressive win for the family budget. Gas and electricity prices can vary considerably and unfortunately it is rarely loyal longstanding customers who benefit most. Switching providers can save hundreds of dollars every year, without a reduction in the service provided. Energy costs assistance for low income families is also available in some areas. This can involve emergency grant payments to help meet the cost of energy provision as well as measures to improve energy efficiency in the home. Telecommunications costs are another significant expense for families. According to recent research carried out by the Canadian Radio-television and Telecommunications Commission, household spending on cable, cell phone, home telephone and internet has risen to an average of $191 per month. Sourcing a new cheaper package could generate considerable savings and so it is worth finding out if better deals are available which meet your needs. Read the small print carefully though and ensure all charges are clear.
Be frugal about food
Rising world food prices mean many families these days are struggling to pay for the food on their tables. Yet all too often the same households waste the contents of their fridges and cupboards because they unnecessarily get rid of good food. This is a major problem – it is estimated that close to 50% of all the food thrown away in the UK comes from domestic homes. Canada has a similar level of domestic food waste which is worth an estimated $27 billion every year. Fighting the battle against unnecessary food waste involves learning the tricks of thrifty buying and sensible food usage. Plan out a weekly family menu and only buy what you need. Allow some flexibility but aim to have a fridge that is practically empty by the time of the next big grocery shop. Stick to healthier sized meal portions and watch your waistline and bank balance both benefit. Learning the lessons of effective food storage can also have a major impact. Over £12.5 billion is wasted each year in the UK on food which is bought, never used and then thrown out. Navigating food labeling, using air tight bags and refrigerating as recommended can all improve the longevity of a variety of food items and increase their usability.
This is a freelance article written for Fernwood NRG by Gemma Harter.
