With food prices for essentials rising by a staggering 19% in 2023, many families are wondering how they can save money amid sky-high inflation rates and a cost-of-living crisis. If you’re keen to level up your budgeting skills, you’ve come to the right place.
Why do you need to save as a family?
It probably doesn’t come as a surprise that families should be saving. But often, it’s easier said than done. Regardless of whether you find it difficult to save or not, families should be taking active steps towards saving money to build wealth and provide financial security.
Wealth gives many families a way out of sticky situations in many cases. For example, if the boiler breaks down or you unexpectedly have to pay for a new car, having an emergency fund is crucial to avoid crippling debt.
But it’s not just that. Having money in the bank can help boost your credit score so you’re able to apply for loans with better interest rates when you’re saving up for a deposit and mortgage.
Whatever your financial goals are, you’ll need to learn how to budget properly. Here’s how.
How to budget
Calculate your income
Before you can figure out what you can afford to save, you’ll need to work out your income. If you’re a single-parent household, this is easy. Just take your salary, any benefits and additional income from other work sources like freelance work.
If you’re in a dual-income household, add this all together.
Note down your monthly costs
Now you know what’s coming in, it’s time to look at your income vs outgoings. Start by writing down a list of all your monthly spending – including your wants and needs. This should cover everything from housing, childcare, food, car payments and any loans. Then add in extras like holidays, cinema trips or meals out.
Work out your net income
By taking away your wants and needs from your total income, you’ll be able to see if there’s anything left over. If you’re in negative figures, you’ll need to reign in your spending so that you have money left over. If you’re left with money, this is what you can comfortably afford to save.
Work out where you can save
If you’re not left with as much as you’d like at the end of each month, you can go about identifying areas where you could save money.
This could be simple things like reducing the amount you spend on food by buying less meat, buying in bulk or switching supermarkets to a more affordable alternative. Or you could look into switching energy suppliers or cancelling unnecessary subscriptions.
Knowing how, why and where to save money can be tricky. But if you’re going to give your family financial stability, it’s important to start budgeting. Although this can seem daunting at first, the hardest part is getting started. Once you’ve built a solid foundation, amassing wealth is easy.