In today’s fast-paced world, raising a family comes with its fair share of financial challenges. Balancing the costs of childcare, education, groceries, and extracurricular activities can be daunting. However, with the right budgeting strategies, parents can create financial peace of mind and provide a stable future for their children. In this blog post, we’ll explore practical steps and examples on how to budget monthly expenses for parents effectively.

What is Budgeting?

“It’s not what you earn that makes you big but what you save” is a famous saying. The easiest way to save more is by budgeting your money.

A process of planning a way to spend money can be defined as budgeting. It ensures and allows you to create an expenditure plan, enough to be used later. However, the definition of budgeting is not just cutting down on luxuries or never eating out. As best explained by Dave Ramsey,

“A budget is telling your money where to go instead of wondering where it went.”

Practical Examples-

1)The Andersons prioritize saving for their children’s future. With a monthly income of $7,000, they have a mortgage of $1,800, utilities costing $250, and a car payment of $400. They allocate $400 for groceries, $150 for transportation, and $200 for dining out and entertainment.

In addition to their fixed and variable expenses, the Andersons set aside $500 each month for their children’s college fund. They’ve also created an emergency fund, allocating $200 per month to ensure they’re prepared for unexpected expenses.

2) When you need to buy clothes for your children, you can ask yourself, “What could I do with $50” or “Is this the best choice to use my $50 of hard-earned money?” If you buy a dress for $50 and your daughter loses interest within 3 months of purchase and starts asking for another one, those $50 of hard-earned money become useless. Instead, use a scale of 1–10 for value. The $50 dress was pretty nice, so it gets an 8/10, but I saw a similar dress on sale for $35 and it was a 7.5/10. Is half a point worth a $40 difference?  It’s up to you to make your child recognize the value of money and become wise.

By applying these tips, you will save your cents adding up to a huge saving account eventually! Indeed, the person who earns knows the value of pennies.

How to Budget Monthly Expenses: Balance is the Key!

Everyone has their own way of saving money for a practical budget, whether by denying a $4 latte or going for shopping during the ‘Christmas sale’. However, the key here is to be moderate or take the middle route.

Evidently, expenses are never ending! Parents are always struggling to fulfill the desires of their family and balance the finances.  However, managing and balancing expenses is one thing hardly spoken about. Prophet Mohammed Peace Be Upon Him, profoundly stated,

“The one who is balanced will not fail.”

Imam Ali bin Abi Talib Peace Be Upon Him wisely stated, “a person who buys what he does not need, will end up selling what he does need”. It puts forth the basic principle of expenditure. One should divide their income in a manner that the necessities are secured without falling in the trap of loan. A simple way to balance your expenditure is knowing how to budget monthly expenses.

Here are 7 Steps on How to Budget Monthly Expenses:

1. Calculate your monthly income: This includes your salaries, side hustles, and any other sources of income. For example, if you and your partner earn a combined monthly income of $5,000, that’s your starting point.
2. List Your Fixed Expenses-: Examples include mortgage or rent payments, utilities, insurance and loan repayments. For instance, if your mortgage is $1,200 and utilities cost $200, add these amounts to your list.
3. Identify Variable Expenses: These might include groceries, transportation, dining out, and school trips. To budget effectively, review your past expenses and estimate your monthly average for each category. For instance, if you spend about $500 on groceries and $200 on transportation, add these to your list.
4. Plan for Irregular or Sudden Expenses: Don’t forget about expenses that occur suddenly, such as car repairs, medical bills, or yearly school fees. Set aside a portion of your monthly budget to save for these occasions. For instance, if your annual car maintenance averages $600, allocate $50 per month for this purpose.
5. Set Saving Goals: Having concrete objectives helps you stay motivated like going on a vacation every 2 years, saving for your child’s education, or paying off debt.
6. Track Your Spending: This can take many forms: notebook, spreadsheet, budgeting app or simply keeping receipts after every purchase. Some of the most effective strategies include reviewing credit and bank statements.
7. Create a Realistic Budget: Based on your income, fixed expenses, and goals, create a budget that allows you to allocate funds to your variable expenses and savings. Be realistic and ensure that your expenses do not exceed your income.

Conclusion

‘How to budget monthly expenses’ is a constant confusion for parents and can seem like a daunting task. But with the right approach, it becomes manageable and empowering. By following the steps outlined about how to manage monthly expenses, parents can take control of their finances, reduce stress, and work toward a brighter financial future. As the saying goes,

“The goal isn’t more money. The goal is living life on your terms.”

Budgeting is the key to achieving that goal and creating lasting financial peace of mind for your family.