How to Stick to your Family Budget

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Doing a budget is one thing. Sticking to it is another.

That is a common sentiment, even for me. There have been times when my family is good at sticking to our budget and times when we haven’t been so good.

About a month ago, it seemed like our bank account was pretty low. Where was our money going? I realized that our budgeting software YNAB – more on that in a moment – wasn’t updated and therefore I didn’t really know the answer.

So we diligently updated YNAB over a few days and realized we had spent $20,000 in renovations at both our home and rental property since the beginning of the year. While some other categories were over budget, they weren’t the root of the problem. The reno spending was.

You may be just starting out trying to get a handle on your budget. Perhaps you’re like we were – you’ve set out a budget, but you’re not sticking to it and you don’t know by how much. Maybe you don’t know where to start to figure that out.

Rest assured, wherever you are, you are not alone.

Here is a three step process on how to stick to a family budget.

1. Set your budget

If you haven’t done so already, create a budget. Set a goal for your family of how much you want to spend in various categories. This article on How to Budget as a Family gives more information on how to do this.

Why is a budget important? A budget gives you a plan of what you expect to happen. You will integrate goals, like putting a certain amount towards paying off your student loan or getting out of credit card debt. Like most families, you may be juggling many different expenses and you need to figure out how to make it all work.

Another important reason to do a budget is to test your assumptions. Sometimes we think we’re spending a certain amount on one area, like groceries, when the truth is far from it. The shock of “we spend $1000 on groceries?!” can give you an emotional push to make a change. So write down what you should be spending, or even what you think you’re spending. This is important for the next two steps.

2. Track your money

The next important step in sticking to your budget is to track where your money is going. To do this effectively, you will need a structure in place to inform you how much you are making and how much you are spending in various areas.

Think about your family finances like a business. A business can’t rely only on its projections; it must track its income and expenses to know how well it did or didn’t do. To figure this out, the business uses a system to keep track of its income and expenses, and produce summary reports.

Family finances should be no different. You need to know where your money is actually going in order to make adjustments as necessary.

There are two main ways to track how much you’re spending.

Firstly, you can do this manually. Get several envelopes for money and label them for your budget categories. Does it have to be envelopes? No, any container is sufficient, but carrying around envelopes is easier than carrying around containers!

As a next step, withdraw the amount of cash you budgeted for each category for the month – or week, whatever timeframe works for your situation – and put these cash amounts in your envelopes. Then only spend the cash from these envelopes. No debit cards. No credit cards. Nothing else. As a bonus, keep your receipts in the envelopes to see what you spent your money on.

For most people, using cash makes them hyper-aware of how much they are spending and even think twice about purchases. It is also enlightening, to say the least, when the envelope runs out and there is no more money for a category.

Never underestimate the power of cold hard cash to help you stick to your budget.

The other way to track your money is to use an app that integrates with your bank account. We use YNAB, but there is also Mint.com and others.

YNAB pulls in transactions from our bank account and we categorize the spending. YNAB then recognizes future transactions that follow similar patterns and suggests the category for you. This is a huge time saver.

I like using an app like YNAB because it does a lot of work for you and has various reporting capabilities. I can look up how much we’ve spent in a given time period and see the averages.

For example, I could see that we had spent way more on our cars this year than what we had forecasted. We budgeted $450/month for fuel and maintenance – a number pulled from our data last year – when we had spent nearly $750/month on average so far this year.

I don’t think an app packs the same punch as using the manual cash system, but is more convenient and likely sustainable in the end.

3. Put Structure and Accountability In Place

So you’ve set your budget and tracked your expenses. Now what?

The answer is essentially “repeat!”, but it’s often not that simple. We know what to do, but we don’t always do it. There are two tips to help you stick to your plan.

Most of us need to a structure in place to keep this going. Schedule a time each week or month to update your expenses, like a recurring meeting in your calendar. Get an organizer at home to classify receipts. Whatever you do, make sure your structure is easy and convenient for you, so that you remove barriers to letting your budget goals slide.

Secondly, most of us also need some kind of accountability to succeed in the longterm. Get an accountability partner – your husband, wife, partner, trusted friend or another person who has a vested interest in your success. Then set a monthly money date to talk about finances and look at how you did.

The emotional appeal of having to report to someone and not letting them down is a powerful motivator to help you stick to your family budget.