Money has a tendency to slip through one’s fingers, more so when you’re, married with young kids. There’s a danger that young parents might lose control over their spending, which leads to incurring debt—and that is never a good situation to be in, especially when you’re married with young kids.
Many people—single and married alike—simply spend as they need, and count on the next paycheck to replenish their finances. If you’re making enough, this might be fine for the short term. But “short term” is terrible if you’ve got big things planned for your child. After all, the money for her future college tuition won’t just appear out of nowhere.
Prioritizing And Planning
A budget can help couples live within their means today, plan their financial direction for the rest of their lives, and see where they spend too much and where they can afford to spend a little more. It also helps create guidelines for reaching financial goals, and helps measure the family’s progress toward reaching them.“ A budget simply records how much money is coming in and where it is going out,” says George Kinder, author of Seven Stages of Money Maturity.“ A budget makes no judgment; it’s a tool that tells the truth.”
A Budget For Any Income
There’s a right budget for you, however much you might be making or spending. The less you make, the more you should be vigilant and conscientious about how wisely your money is being spent. The more you make, the more you should be funneling your money into investments and savings that will pay bigger dividends in the long run.
Buying Your Own Future
What do successful budgets have in common? For one, savings are treated as an expense, and debt is kept at a manageable level. Beth Kobliner, author of Get a Financial Life!, enumerates the main expenses that should get extra attention on any budget:
20% OR LESS FOR DEBT - Total debt burden should never eat up more than 20% of the couple’s take-home pay. Kobliner includes credit card debt, auto loans, and other lines of credit into this category.
30% OR LESS ON HOUSING - Total housing should eat up no more than 30% of the couple’s monthly take home pay. This includes rent, housing loan, or mortgage payments.
10% ON SAVINGS - Savings are essential to every budget, and Kobliner suggests you put away at least 10% of your combined take-home pay every month. “It’s critical to think of your savings as a fixed monthly expense that’s part of your budget,” says Kobliner. “While there’s no magical reason to save exactly 10%, the money you set aside can meet long-term goals as well as subsidize a retirement plan.
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If you can save more, you definitely should.” Francisco J. Colayco, author of Pera Mo, Palaguin Mo!, couldn’t agree more. “Savings are really an expense,” Colayco explains, “an expense that buys your future. Most of us define savings as ‘income minus expenses.’ This is very [misguided]. Dapat, ‘income minus savings equals expenses!’” If your savings consist of whatever’s left over at the end of the month, you may be in trouble—expenses always expand to consume any surplus.
Sources: George Kinder, Seven Stages of Money MaturityBeth Kobliner, Get A Financial LifeFrancisco J. Colayco, Pera Mo, Palaguin Mo!