For parents it’s the time of year when it can feel like money is flying out the door. Uniforms and stationery have been purchased, school donations often still need to be paid, term 1 activities are starting up and winters sports are asking for registrations. This can also coincide with thoughts of a swimming pool (even a plastic one!) because it’s still so hot, or a family holiday (because its week 4 and in a minute it will be school holidays again) or wanting to get started on the renovation you agreed in the holidays.
Which makes February an excellent time for a financial review of your household spending.
The best place to start is to set aside time as a family, or couple, and have a discussion on your financial goals, priorities and action steps. Children should be involved in this discussion too, you might be surprised at what they think is important!
Some questions to get you started might be:
- How do you, as a family, define financial security? Is it just having enough money to pay all the bills? How much do you have set aside for emergencies?
- What are your big family dreams for the next year? The next five years? What about the next ten years and beyond? (You might include a family holiday, buying a home, retirement, or children starting university)
- What can you spend less on as individuals, and as a family, to help achieve the big goals? Are there any areas where money is being wasted? How can each family member contribute? (E.g. turning off lights to save electricity, taking packed lunches or less takeaways)
- What type of spending gives you the most enjoyment as a family? If you had an extra $1000 how would you spend it?
Once you’ve established what’s important to your family take some time to see if your habits are aligned with your goals and review your current spending. You might find you’re spending money on things that really aren’t important to you in the long run. This can be as easy or hard a process as you make it!
You can review your current spending by simply going through your bank statements with a pen, highlighter and a calculator identifying pockets of spend, or to get more detailed, use an app or website to help e.g pocketsmith.com, Westpac’s CashNav or ASB's Track My Spending app.
Then pick the more flexible parts of your budget – such as entertainment or clothing – and redirect that spending into savings (which will then be used on your long term goal).
It might not get you ahead this term, but being clear about your spending priorities will help you stay on track and take away some of the stress. Make it a point to review your priorities and progress as a family every few months. It may mean that next year you even get that pool!