Six Ways to Set Budgeting Priorities

For some of us, budgeting is second nature. For others, it seems a nearly impossible task. There are just so many things to consider that it’s hard to decide where your funds should go.

Setting priorities makes budgeting much simpler. But even this is difficult for many household money managers. Priorities are somewhat subjective, and those within the household often have vastly different priorities. Here are some ways that you can make priority setting a little easier:

1. Keep first things first. When it comes down to it, there are only a few things that we truly need to survive. These things include food, water, clothing and shelter. Transportation and other things that enable us to work and continue to make money also fall into this category. These should always come first in the budget, although it’s always a good idea to do our best to save money on them.

2. Keep savings in mind. We all need to put money aside for emergencies and set up a retirement fund. It’s also wise to set up a college fund for each of your children as early as possible. But many families push savings to the side, and it often ends up out of the picture altogether. Putting money away prior to any discretionary spending is crucial if you wish to meet your goals.

3. Evaluate your debts. If you have none, you’re in the lucky minority. Most households have large amounts of debt, including mortgages, car payments, loans and credit cards. By paying your debts off as quickly as possible, you can save lots of money in the long run. And once they’re paid in full, you’ll have a lot more wiggle room in your monthly budget. Putting as much money as you can afford toward paying off debt will help you reach that point much faster.

4. Set goals as a family. Maybe you would all like to go on a nice vacation next summer. Get everyone involved in deciding where to go, then calculate your expenses. Get everyone involved in saving money for this goal. Not only will you get to go on a family trip, you’ll also be teaching your children about budgeting and teamwork.

5. Review your budget periodically. A family’s needs change over time, and if your budget is no longer meeting your needs, it’s time for a change. Once again, you’ll need input from everyone in the family to make this work.

Priorities are at the heart of a successful budget. By keeping them in mind, we can resist impulse spending and make progress toward our financial goals. And by getting input from the entire family, you can gain valuable insight into individual needs and encourage interest in working together to keep your finances in good shape.

How to Budget for School Trips and Activities

Most of us have fond memories of the trips we took and the activities we participated in when we were in school. But when it comes time for our children to do these things, we may balk. It’s not that we don’t want them to have fun and educational experiences in school, it’s that they’re just so expensive.

Today’s school trips are often much different from those we went on during our school days. They often involve traveling out of state and staying one or more nights, even for elementary and junior high students. Even day trips have become more expensive, requiring parents to pay bus and admission fees. This is generally a result of reduced education budgets.

Handling requests to go on field trips and participate in activities can be difficult. Here are some ways you can work these things into your budget.

* Pick and choose. If your child’s class goes on multiple trips during the year, you may not be able to afford them all. Consider saying “no” to some of them. Talk to your child about which ones he wants to attend the most, and look at the educational value they provide. Then make a decision and stick with it.

* Be honest with your child. She may feel that it’s not fair that she doesn’t get to go on a trip that “everyone else” gets to go on. Explain that you would pay for the trip if you could, but it’s just not an option.

* Talk to your child about raising the money on his own. Older kids could get a part-time job to earn the needed funds. Younger kids might do a fundraiser such as a car wash or bake sale to get the money they need. If your child gets an allowance, perhaps he could pay the fees out of that.

* For big, expensive trips, find out if you can make payments. Coordinators often let parents know about such trips well in advance, and they may even set up a payment schedule for everyone. If you don’t feel that you can pay on that schedule, meet with the coordinator and ask if you can set up an alternate one.

* Consider asking relatives for help. Perhaps each grandparent, aunt or uncle could contribute a small amount to help fund the trip. If you can get several people to give a small amount, it won’t put a burden on anyone.

Field trips and other activities usually have educational value, and they foster a love for learning. But if you can’t make room in the budget for them, there’s no need to feel guilty. If you explain why you can’t afford to pay your child’s way, there’s a good chance that she will understand. She might even take it upon herself to raise the money, and that in itself will be a valuable learning experience.

How to Save Enough for Retirement

For younger workers, retirement may seem like a distant event that doesn’t bear a great deal of consideration. Most of us realize that we should be putting some money away, but comparatively few actually do so. And those who do may not be saving enough.

Too many workers continue to rely on Social Security and pensions as their main source of retirement income, and see savings as a way to have extra money. But these days, that kind of thinking is seriously flawed. It’s entirely possible that Social Security may not exist in a few short decades, and even if it does, it could pay less than it does now when accounting for inflation. Pensions are also becoming a thing of the past. So it’s up to us to make sure we have enough retirement savings to live on.

How Much Money Do I Need to Save?

There are many different ideas regarding how much money we need after retirement. Some advocate saving up a few million dollars so that one can live off the interest. Others reason that if you pay off your debts by the time you reach retirement age, you won’t need anywhere near that much.

But most experts suggest that one should save enough to have 70 to 90 percent of one’s annual pre-retirement income each year after retirement for 20 years. These numbers should take inflation into account, which is generally estimated at 3% per year, as well as investment returns before and after retirement. The final figure will vary for each individual, but as you can see, this will add up to a substantial amount of money.

Once you’ve figured out how much you’ll need altogether, you need to calculate how much you must save each month to reach that goal. To do this, count the number of years until you plan to retire, multiply by 12, and divide your total by that number. If math is not your strong suit, you can find retirement calculators online that will run the numbers for you.

The Best Time to Start Saving Is Now

Even if it seems like retirement is eons away, it’s important to start saving as early as possible. Ideally, we should start saving for retirement from the time we start our first jobs and continue to do so consistently for the remainder of our working lives. But in practice, it rarely works that way.

Just remember that the earlier you start saving for retirement, the more painless it will be. For each year you postpone saving, you’ll have to save a little more each month to reach your goal. If you keep procrastinating for years and years, you’ll eventually have to put a significant portion of your income toward retirement. So there’s no time like the present to start planning for your golden years.