From figuring out how much you can spend each week to setting aside money to achieve long- and short-term savings goals, managing family finances can be a lot to balance. When creating your family budget, avoid these common mistakes.
Not cutting costs
When you have children, your lifestyle changes out of necessity. However, one common money mistake that parents make is not adjusting your spending habits to fit this new lifestyle. For example, if you and your spouse were accustomed to going out to dinner and a movie once a week, that becomes an even bigger splurge, because you now have to factor in the cost of a babysitter. That extra cost adds up significantly over time. Plus, your expenses will go up — from food and diapers to clothing and toys — with each child. Find ways to cut costs and to live a more frugal lifestyle. Nights out can become special splurges, and you can cut costs by taking steps like shopping sales and using coupons.
Not saving for retirement
As a parent, you want to put your child’s needs first. But when it comes to saving for the long term, that might be a mistake. Many parents budget for their child’s college costs rather than socking away extra money for retirement. This practice is fine, as long as you’re putting away some money for your retirement first. If you’re not, it’s time to revisit that budget. While financial aid is available for college, it isn’t available for retirement. Your family budget should prioritize saving for retirement first, and then saving for college.
Not discussing money with your kids
It’s critical to talk about money issues with your children. You don’t have to stress them out by discussing your personal money woes if you have them. But it’s important to teach your children about saving money versus spending money. Explain to your children how credit cards work, how debt can accrue and how interest works. Give your kids an idea of how the family budget works, and take them shopping so they can see the choices you make to stick with that budget. Help your kids become financially literate at a young age so that they’re able to make good money decisions for themselves.