Every household has monthly expenses; failure to plan wisely results in living above one’s means and being forced to take credit cards. According to statistics, 83% of Americans say they overspend. Therefore, having a family budget is important to curb bad spending habits.
Creating a family budget may appear complicated. However, all you need to know is where to start and what items to include in your budget. Generally, the expenses in a budget can be classified as either fixed; which recur monthly, or variable; which changes regularly. Although a budget may differ from household to household, some priority items cut across everyone.
1. Mortgage or Rent
There are two main housing options: buying or renting a home. Rent and mortgage are fixed expenses you should prioritize when drafting a budget. The question is, how much should one spend on rent or mortgage? To answer that question, refer to the 30% rule that states you shouldn’t spend more than 30% of your income on rent or mortgage. Unless you’ve fully paid for your home, you’ll have to spend money on mortgage or rent; in most cases, you don’t get to decide whether to pay, as failure to pay could adversely affect your credit score.
2. Home Maintenance or Improvement
You may incur other household maintenance expenses besides paying a mortgage or rent. Unfortunately, your home appliances won’t last a lifetime; occasionally, you must replace or repair something. Unlike when renting, when you are a homeowner, you’ll need to take care of all repairs and replacements necessary.
For example, you may have to contract HVAC services or painting contractors if you need to repair your AC or have a fresh coat of paint. The question is, how much do you set aside for maintenance? Specialists recommend putting aside at least 1 or 2% of the buying price of your home for routine annual maintenance.
Home maintenance and improvement is inevitable. However, there are steps you can take to ensure you spend less than you have allocated in your family budget. For example, preventative maintenance- you don’t have to wait until it’s broken to fix it; regular home maintenance, even when everything is seemingly okay, will help spot and mitigate issues before they escalate and cost you a lot more. The second step that will help you save money is hiring qualified professionals- Contracting unqualified people will make the problem bigger and cost you more since the next person you hire will have to undo and rectify the problem.
3. Home Cleaning Costs
If you plan on hiring janitor services for a home deep clean every once a month, it’s important to include that in your family budget. According to Forbes, the cost of individual janitorial services ranges between 60 and 400 dollars. The amount you pay to clean your home depends on the space size and how long it takes.
In most cases, the people who outsource cleaning services either have no time to clean their homes themselves or have some physical limitation that makes cleaning impossible. Therefore, if you are healthy and working on a tight family budget, you can at least spare a couple of hours each month to clean your home and instead channel the money you would otherwise have to other key items on your family budget.
4. Carpet Cleaning Costs
According to IBISWorld, 33,101 carpet cleaning companies exist in the United States. This is an indication that many Americans contract for professional carpet cleaning. According to Forbes Home, the average amount for cleaning your carpet is 165 dollars.
This amount can vary depending on the carpet size, type of carpet, stairs, moving furniture, and the company you contract. The amount may also vary depending on the type of cleaning you prefer; some cleaning methods may require more time and are more expensive. Therefore, if you choose to have your carpet cleaned by a professional, choose a method your family budget can accommodate.
Will I save money by having a professional service clean my carpet? The answer is yes. Simple actions such as vacuuming your house often save you money; the more often you vacuum your carpet, the less time it’ll take a professional to clean. It also means you’ll only need to hire cleaners for the high-traffic areas. In most cases, parts of the carpet covered by furniture rarely get dirty.
Professionals recommend cleaning your carpet once every 12 months. You may argue your carpet isn’t too dirty and are willing to wait it out for another 12 months. Have you tried moving your furniture to see the contrast between the covered area and the exposed part? You’d be shocked. If you notice that the color of your carpet isn’t the same as when you bought it, that’s a sign you need to contact a professional; other signs to look out for include smells and stains.
5. Landscaping Costs
Apart from ensuring the house’s interior is well maintained, take care of the land where the house sits. If you don’t have the time or know-how, contact a professional landscaper to help ensure your lawn and backyard are always stunning. According to ABC Scapes, you should mow your lawn after every one or two weeks.
As you draft your family budget, set aside landscaper fees for the two visits per month. According to Lawn Love, the average cost of landscaping ranges between 4.50 to 17 dollars per square foot. However, if you want to install mulch around your home, you can expect to spend at least 85 dollars per cubic yard.
Remember that all the amounts stated above are estimates. You’ll need to consult with different landscaping companies to get the best deal in the market. Another key factor is that your family budget will increase if you want to include customized items such as gazebos, landscape ponds, or swimming pools.
6. Doctor Expenses
Health care is important for each member of the household. However, according to the Peter G Peterson Foundation, the United States has one of the most expensive healthcare systems in the world. Only 60% of Americans can afford a primary care doctor.
If you don’t have medical insurance coverage, a basic visit to the doctor will cost you around 150 to 300 dollars; additional services such as lab testing, immunizations, or prescriptions will attract a higher cost. Therefore, it’s important to set aside money to cater for your medical insurance since out-of-pocket payments may be too much to handle. The amount you pay for health insurance will depend on the plan you are on and your location.
7. Dental Work Costs
On average, every American visits a dental clinic at least once every six months or when needed; dental work cost is an example of a variable expense. As an adult without insurance or serious dental issues, you can expect to spend at least 1000 dollars annually on dental care. However, if you want to undergo a cosmetic dental procedure, you should prepare to spend much more.
Typically, health insurance doesn’t cover cosmetic procedures since they’re regarded as a want and unnecessary. Therefore, if, for example, you want to have an Invisalign procedure, allocate about 1,800 to 10,000 dollars on your family budget to cover the out-of-pocket payment.
8. Vision Care Costs
Different studies have established that most Americans have good vision; only 4% are visually impaired. Of the 14 million visually impaired, 83% can be corrected using prescription glasses or contact lenses, while the rest require surgery. A vision insurance policy is beneficial if you or any family member require vision care services. According to Forbes, you’ll need to set aside about five to thirty dollars per person monthly. However, you can expect to pay more should you wish for a more comprehensive cover.
9. Food and Groceries
While food is a basic need, it can also be a considerable expense when you must budget wisely. Food and groceries are fixed monthly expenses that differ according to household size, location, and lifestyle. However, according to Cynthia Measom, the average monthly spending on food in American households is 438 dollars.
It can be tempting to overspend on food, especially if you have just landed a better-paying job. You want to visit all the excellent restaurants you previously couldn’t afford and maybe eat out more. However, you don’t want to flush all the extra earnings. You need to go about it wisely and set aside a fixed amount of money for eating out and sampling new restaurants. In doing that, you can channel more money towards achieving other long-term financial goals.
10. Utilities
According to Forbes, an average American household spends about 429.33 dollars monthly on utilities. Utilities are classified under variable expenses since the amount you spend on, for example, water or electricity, differs monthly. If this average monthly spending on utilities seems too high or too low for you, remember your location in terms of state and whether you live in an apartment or house will affect the amount you pay for utilities. A few examples of utilities to be included in a family budget are;
Electricity: This is one of the utilities you will most likely spend the most on. Several factors influence the amount you pay for electricity in your home; fluctuating energy prices, seasons, and usage. To spend less on electricity each month, consider investing in energy-efficient appliances or enrolling in programs such as budget billing, which allows you to pay a fixed amount on your electricity bill.
Water and sewer: The national average for water and sewer expenses in the US is 54 dollars per month. Every time you run the dishwasher, shower, or flush your toilet, you increase the water cost in your home. Therefore, to reduce expenses on water each month, fix all leaky taps and replace all inefficient appliances in your home.
11. Entertainment
You’ve worked hard for your family. You deserve to take time off to relax and unwind with your family. Be purposeful about this and include entertainment expenses in your family budget. Set aside money for the movies, eating out, ordering in, going to a game, and attending shows and concerts, among other things. An entertainment budget keeps you in check, so you don’t overspend.
12. Emergency Fund
An emergency fund is among the priority items in an American family budget. It may be difficult to estimate how much you need when an emergency occurs since it’s unforeseen; the money you set aside may only partially cover the emergency expense. However, it’s important to have at least some money in your budget to complement the out-of-pocket money you will be required to spend in an emergency.
If you still aren’t convinced of the importance of having an emergency fund, consider the following emergencies. Let’s say, God forbid, you lose your job, but you don’t have an emergency fund. Things can get very tight in a situation like this. An emergency fund helps you transition smoothly. You can use the emergency fund to pay for a mortgage or rent. It also allows you to think through your next career move carefully.
Here’s another scenario: you are sitting down enjoying your favorite show on a quiet, cozy evening; you notice your roof is caving in. This will not only ruin your perfect evening but also cost you an expensive visit from a professional roofer. What would you do if you didn’t have an emergency fund?
Whether you’re employed or run a business, devise a plan to keep your family spending in check. That plan is known as a budget; failure to stick with it could lead to unauthorized expenses that negatively impact your finances. Granted, there are crucial expenditure areas you have minimal control over, but others aren’t that critical.
The key is tracking expenses to see where you’re losing money. Next, prune all the unnecessary expenses by prioritizing the critical expenditure areas. These are the eleven stipulated above. Of course, this isn’t to say you shouldn’t spend on other areas, but these are some of the unavoidable ones that must be in your family budget.
After setting up a budget for your family, stick to it. It’s futile having a budget that’s violated at every turn. You’ll need discipline and focus to honor it. It’s the only way to live within your means. The other is to expand your means by increasing your income.
