How to create – and stick to – a family budget

Financial author Jacqui Clarke is interviewed by Pip Harry for Real Life Insurance.

As the cost of living continues to soar, some families are feeling the squeeze on their finances. Nearly one in two Australians claims that the cost of living pressures are considerably impacting their personal household finances.

Personal wealth and money management expert Jacqui Clarke, author of Stop Worrying About Money offers practical tips for creating and managing a simple family budget to deliver daily savings. “Budgeting habits require some planning and effort, but they can lead to significant savings over time,” says Jacqui. “Evaluate your expenses regularly to identify areas where you can make cuts. Challenge yourself on needs versus wants; once you're clear on that, it’s a whole lot easier to save and improve your family bank balance.”

Do Aussie families really need to stick to a budget?

Developing and managing a family budget can help deliver savings and could reduce stress given the increased cost of living. “Start with understanding what it costs to run your home to create a budget baseline,” says Jacqui. “Extend this by setting financial goals, tracking income and expenses, prioritising expenses, and adjusting the budget as needed. Tracking income and expenses will help you identify where your money is going and where you can make cuts or adjustments. Prioritising expenses means focusing on what’s most important to your family and keeping a lid on some of the more discretionary items for the time being.”

Is there a one-size-fits-all option?

“Budgeting is not a one-size-fits-all solution,” Jacqui says. “Each family’s situation is unique, so it's essential to tailor the budget to suit your specific needs. Factors such as income, debt, and family size will determine the appropriate budget. Take the time to evaluate your financial situation by determining your baseline of costs, the ‘essentials’, and what can be cut. This may mean making difficult choices, but it's crucial to prioritise your family's needs and financial stability.”

What are the secrets to a healthier bank balance?

Families can drive more affordability every day by adopting simple daily habits. According to Jacqui, some options to consider include:

• Cut back on unnecessary expenses, such as designer brands and the latest expensive gadgets. Trading sites like Gumtree or Facebook buy-swap-sell groups offer bargain deals on second-hand goods. 
• Use family vouchers in your state or territory. For example, the NSW government offers vouchers for school-related purchases, swimming lessons, recreational activities, and before and after school care expenses. 
• Plan meals and cook at home. Subscription food services like Marley Spoon, EveryPlate or HelloFresh could be more affordable than buying the ingredients separately, in certain situations after factoring in delivery costs.    
• Shop around for the best grocery deals, especially on expensive items like protein, and avoid impulse buys – order online from a list, and buy non-perishable items in bulk.
• Reduce energy usage (make a family pact to turn off the lights when leaving a room!).
• Review subscription and streaming services and stop them all or only keep your most used service.
• Cut your work commute – round trips, five days a week can add to your expenses.

How can I get the whole family onboard?

Getting the family to stick to a budget can be challenging, but there are ways to make it easier. “Involve the whole family in the budgeting process, set achievable personal and family goals, and reward each family member’s progress,” says Jacqui. This means everyone has a stake in the budget, understands why it's important, and feels like they’re making a contribution to the family’s financial wellbeing.

Is it important to set goals?

“Financial goals should be specific, measurable and attainable,” says Jacqui. Setting realistic goals means that you're more likely to achieve them and stay motivated, Jacqui explains. Examples of more ‘fun’ goals include saving for a family holiday or putting aside money for extra family activities, meals out or special “treat” purchases.

Other short-term goals may include paying off certain types of debt (for example prioritising credit card debt), or building an emergency/rainy day fund. “Short-term goals can help the family stay motivated towards the bigger picture,” she explains.

Examples of long-term goals include being debt free or planning a six-month sabbatical from work. Being clear on these goals and regularly reviewing them in conjunction with your baseline cost of living could help reduce money worries and give you confidence and independence for the longer term.

What can families splurge on?

“Even in tighter times, families could consider splurging on experiences and items that provide long-term value, such as education or health-related expenses including fitness,” Jacqui stresses. Consider prioritising your spending based on what's most important to the family. This may mean sacrificing some immediate wants for the sake of long-term goals. However, it's also important to find ways to enjoy life and create happy memories, even on a tight budget. So, plan a fun weekend away with your family but don’t forget some of the best ideas happened during COVID, when we had to be creative at home, such as when we could enjoy the family cooking and bike riding together.

Whatever you choose to splurge on, remember that one thing you could consider is insurance. Life insurance is one way to help provide your loved ones with a level of financial protection for when you’re no longer there. Find out more about Real Life Insurance, and how it could benefit your family.