Lightbulb Moment: Benefits of Budgeting for Families

Do you ever feel overwhelmed by your expenses, scrounging and stressed about making it to the next paycheck? Do you get to the end of the month and are confused where all the money in your checking account went? You are not alone in these financial worries. Charlotte Morabito at CNBC discusses how over 60% of Americans are living paycheck to paycheck, including those in higher income brackets i.e. those earning over $100,000 a year. With salaries failing to keep up with the cost of living, it is becoming difficult for some people to keep track of their expenses and the minimum cost of living. 

Here we will dive into a topic that impacts all families and their well-being—despite finances being an unfavorable topic of discussion. A 2023 survey from Capital One found that 73% of Americans rank their finances as the number one stress in their life, with younger generations (i.e., Gen Z and Millennials) mainly concerned with money. The American Psychological Association found that during the holiday season financial concerns rise as over half of US residents report that overspending or not having enough money brings them significant stress. Furthermore, CNBC published an article in November 2023 stating that a survey done by WalletHub (a platform that provides financial advice) determined around 1 in 4 US residents are paying off holiday debt one year later.

Prepare for Budgeting and Prioritize Financial Literacy

Some families may consider making financially related resolutions with the arrival of a new year, particularly in the context of factors such as high inflation rates, rising interest rates, and economic uncertainty. A survey by Fidelity found that two-thirds of US residents are making new year goals to improve their finances. While saving more money, spending less on unneeded items, and paying off credit card debt are noteworthy aspirations, a goal without a plan has a slight chance of success. 

Financial security plays a role in family well-being. With the New Year in full bloom, we want to give you some tools to help you accomplish your financial goals. Making a budget is one tool that can be highly effective. At times, the concept of “creating a budget” can be intimidating, as managing financial matters can be challenging. Nevertheless, initiating the budgeting process serves to cultivate awareness of one’s spending patterns. Dedicating time to this process can allow families to identify areas of potential savings and pay off remaining debts. Everyone can benefit from creating a budget.

To create a budget, you first need to know your monthly streams of income or income sources. How much does your job bring in a month? If you have a partner or live with a roommate, how much do they bring in? Do you have supplemental areas of income or a part-time gig that brings in extra money? Consider these next steps as you continue developing your budget:

1. Determine your monthly income, considering all sources. 
2. Calculate your monthly expenditures such as rent or mortgage, groceries, utility bills, transportation costs i.e. gas, bus pass, metro card, carpooling, and insurance.
3. Subtract your total expenses from your income.
4. If the result is negative, assess how to generate additional income to cover monthly costs.

Resources are available to help families find job opportunities to supplement income, like the North Carolina Department of Commerce’s Resources for Job Seekers. If the sum of your expenses are a positive value, you have an opportunity to spend or save your additional funds. As a rule of thumb, Yale recommends that, if you are able, you should save 20 percent of your income each month to have a safety net in case unexpected expenses arise. 

Practical Tips for Budgeting

This video, ‘How to set a budget and stick to it,’ by Bank of America, gives an excellent overview on how families can practically create a budget and stick to it.

In the age of technology, we no longer need to rely on paper and pencil to balance our budget, there are many highly effective apps you can use.  Some apps that Forbes recommends for budgeting include YNAB (You Need a Budget) and PocketGuard. Also, most banking institutions have a budgeting option in their mobile app. If you want an option where you have more control over the setup and budget details, many online templates exist for starting your budget. Microsoft 365 has many options, from personal to household expense budgets, so you can find one that best suits your needs.

See these resources that can help families achieve their financial well-being goals:

1. Did You Break Your New Year’s Money Resolutions Already? Here Are Some Tips to Make Them Stick | CNBC 
2. Budgeting and Goal Setting | Yale
3. Best Budgeting Apps of January 2024 | Forbes Advisor

Budgeting is a proactive tool for financial management. It fosters stability, reduces stress, and contributes to long-term economic success, all of which increases wellbeing for you and your family. In closing, addressing widespread financial challenges is essential, underscored by prevalent struggles and alarming statistics. Focused on proactive financial management, budgeting emerges as a vital tool, offering stability and stress reduction. As individuals strive for financial well-being in the face of economic uncertainties, the outlined steps and recommended resources empower them to take control. Embracing budgeting not only fosters awareness and savings but contributes to long-term success, enhancing overall family well-being.