5 tips to get the most from a tight family budget
As the cost of living skyrockets, here’s how you can make your family budget go further.
From getting creative with the kids to going back to basics, there are a few different ways to make your family budget go further.
As Aussies feel the pinch from rising interest rates and the skyrocketing cost of living, financial planner and author of Smart Money Strategy Luke Smith has shared five tips to squeeze the most out of a tight family budget.
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1. Revisit your budget and focus on value
Sometimes it helps to go back to basics. Family budgeting is all about understanding where your money is going and making sure you are getting the best value for your money, Smith said.
“Unfortunately, we can’t take it for granted that we’re always getting fair value for our hard-earned dollars when we buy something. It requires us to shop around,” he said.
“It’s worth the effort for all those recurring costs too, like telephone and internet, electricity and insurance costs.”
2. Understand your cash flow
All families have annual bills like car registration and insurance, quarterly bills like electricity, and monthly bills like phone and interest. And it’s worth looking at exactly when these are coming in, Smith said.
“By doing that, you give yourself the best chance to put something aside, perhaps in a savings account to earn interest, or an offset account to reduce your home loan interest,” he said.
“It's a great strategy for parents who want to take more control of their financial lives and live less worried lives about larger expenses arriving.”
3. Reduce debt as quickly as you can
Once you understand your family budget and cash flow, you can then make a plan to reduce debts like credit cards and a home loan as quickly as possible.
“You might switch credit cards to a lower-rate card or personal loan, while you pay it down, so you pay less interest,” Smith said.
“If you’ve reduced your outstanding loan after the last five or 10 years, and the value of your property has gone up, you might be able to secure a better deal [on your home loan].”
If you can’t get a better rate, consider switching to another lender. If you are in real financial stress, talk to your lender and see if they can help you.
4. Get creative with the kids
Taking a “back-to-basics” approach with the kids can be a fun and cost-effective way to keep them entertained.
“Many of us grew up with a humble backyard veggie patch, so why not give your own kids that learning experience too. Setting up a patch doesn’t take much cost, but it does take some time and can keep young minds and bodies occupied,” Smith said.
“Another idea is to get the kids involved in cooking. While they might be too young to use a cook top, they can mix a cake, knead some dough for bread or scones or help cut up some fruit salad.”
5. Make a plan to reward yourselves
While you’re busy working at your financial goals, don’t forget to celebrate the wins.
“A great way to reward yourselves is to link a reward to achieving a financial goal. It might be reaching a savings goal, a superannuation savings goal, a home loan reduction goal [at different milestone amounts] or perhaps even paying off the credit cards,” Smith said.
The reward doesn’t need to be extravagant - it could simply be going out for a nice dinner, going out to Gold Class movies or just a night away from the kids, Smith said.
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