“We woke the sleeping giant!” is a phrase my husband and I enjoy saying to remind us of the trigger that began our journey to live a debt-free life.

 

For my marriage, the sleeping giant was the cost of full-time daycare. Daycare costs more than we earn each month. We needed to figure out a way to curb our spending habits, so we could expand our family! 

To be successful, we had to commit to more than just paying off debt. We had to commit to our marriage and create new habits to ensure we never found ourselves in this situation again.

 

You may be wondering what “commit to our marriage” has to do with creating a family budget. To achieve any dream for your marriage – creating a family budget, moving out of state, or even the extracurricular school activities you enroll your child into – these decisions all require you to put your marriage first.

 

Consider for a moment the choices you make that seem to have already been made for you. Have you ever thought, “We could not take away our son’s baseball team or our daughter’s dance team; the kids need to have the same experiences we had growing up.” Of course, as great parents, you want to provide the same experiences you had growing up; you are an amazing parent!

 

However, when you spend more than you earn each month, there is the unfortunate realization that something must change. By creating a family budget that works, you will gain a new perspective on what your priorities are for your family. Suddenly, you are not as concerned by what activities your children are enrolled in, because you are creating new habits that ensure lifelong success in building wealth. The habit we will create together is making time to budget. 

The budget is your tool to build wealth and live the dreams you have for your family.  

Let’s begin and learn  about  the three parts of a family budget. 

 

Three Parts of a Family Budget

 What are the 3 parts of a family budget? Remember that money is a tool to build wealth. Breaking out a budget into three parts will help to minimize the complexities that creep in as you create your family budget. There are three main things you do with your money: 

1. Plan your money
2. Spend your money 
3. Save your money

 

If you stick to the plan for your money and maybe even spend less than you planned, you now get to decide what to do with the money you saved. Every couple approaches savings differently. My recommendation is to have a plan for any savings that are generated so you both feel engaged and represented in your hard work! 

My husband and I have a dedicated Emergency Fund, Family Savings Fund, and Rainy Day Fund.

 

Emergency Fund

An emergency fund is 3-6 months of expenses to maintain the Four Walls in your home. The Four Walls are: Food, Housing, Transportation, and Personal Expenses. Remember, in Part I – Planning, you determined the amount of money it would take to cover 3-6 months of expenses if your income changed unexpectedly. Keep your emergency fund in a location that is separate from your checking and other savings accounts. 

 

Family Savings Fund

Putting your marriage first includes a family savings fund. Determine the values and fun experiences you want to have with your family. For some families, it is taking a week-long vacation to Disneyworld! For other families, it’s a flight out of state during the holidays. There is no right or wrong experience or thing to save for in the family fund. I would recommend having enough to cover a car purchase in the event one of your cars passes away. Some families are comfortable driving a car that costs less than $6,000, and others will want to save for a $20,000 car. It is a personal preference and one that requires putting your marriage first and ensuring you have provided for the needs of your home before the needs of those outside of your home.

Rainy Day Fund

What a gloomy name for this savings fund! The purpose of a rainy day fund is to cover those expenses occurring on a quarterly or yearly schedule. In Part I – Planning, the yearly and monthly calendar will allow you to determine the time you have for an expense and the amount of money to put in the sinking fund each month. This is helpful to reduce the worry that may come trying to fit in a large lump sum payment for a particular month. Consider the sinking fund your emotional oasis for those expenses that seem to derail all the hard work and effort you put into creating your family budget.

 

Implementing the Three Parts of Family Budget

Creating these three saving fund types will provide many gifts to your family. The anxiety that occurs when an unexpected event, such as a new set of tires for the car, seemed to have vanished once we established a sinking fund. Having a plan for our money and determining the priorities for spending will help you put your marriage first and reach the dream you want for your family. The work you used to establish the three parts of a family budget will keep you focused as you move on to create a budget step by step!

Step-by-Step Family Budget

When creating a family budget, it’s common to feel uncertain about where to start. However, there are key categories that apply to every family’s budget, and you can modify them based on your family’s individual needs. To begin, start by identifying your priorities. Just like in the TV series Survivor, where the first priority is finding water and shelter, your budget should also prioritize essential needs first.

 

The key categories of every family’s budget are as follows:

 

1. Four Walls: This includes the safety and shelter of your home, which is the most important priority for your family.

 

2. Food: Nourishment is essential for well-being, so create a specific line item for food expenses.

 

3. Housing: Housing should be a blessing for your family, providing protection from the elements, clean water, and a comfortable living environment. Ideally, housing costs should not exceed 25% of your take-home pay if you’re renting or have a mortgage payment.

 

4. Transportation: Unless you live in a city with public transit, reliable transportation is a necessity. It’s advisable to purchase a car without financing to avoid long-term financial commitments and budget for car maintenance, taxes, and other fees.

 

5. Personal Expenses: This category may include child care expenses, health care costs, and other necessities. Each season of life will bring different personal expense categories that require flexible budgeting.

 

To maintain a regular budgeting schedule, it’s recommended to create a family budget before the first of each month. Schedule a monthly budget date and allocate a specific day each week to review your progress and discuss spending money with your spouse.