I’m a Financial Planner, this is how I manage my family’s budget

By: Kevin Flint

When most people think about creating a family budget, they tend to focus on looking at income and expenses. Much like the planning we do here at our firm, I think the most effective family budgets are goal-based. Here is some insight on how I manage my own.

New Year’s Day is one of my favorite holidays. I love the idea of a clean slate and a fresh start. For budget lovers like myself, New Year’s Day is the starting line of a 12-month race. Each year, my wife and I sit down around 12/31 and list out what financial goals we want to accomplish in the coming year. We try to make sure they are detailed but also realistic. We found it most helpful to list some low-hanging fruit as well as stretch goals that will motivate us. Here are some examples of goals we’ve had in prior years:

1. Pay off debt
2. Purchase disability/life insurance.
3. Increase deferrals to our retirement plans.
4. Purchase real estate
5. Begin to fund 529 plans
6. Increase our net worth by $____ or ____%.

Once we’ve listed out our goals for the year, we then start to think about how we accomplish those and sub goals in each category. For example, if we list a goal of “begin to fund 529 plans”, we’ll create a bullet point that says our goal is to add $X quarterly to each account.

Each month, I do review our income and expenses to see if we were able to “turn a profit” for the month. But, more importantly, I also track our net worth as this helps me understand how much of an impact our family “profit” is having. Net worth is simply all the things you own (assets) minus how much you owe to someone else for giving you those assets (liabilities). I like this metric because it does the best at evaluating many of our goals. It will show us if we are successful in reducing debt. It will not penalize us for taking money out of the bank to fund other buckets such as 529, if that’s our goal. It’s a great way to get a sense for how the household is doing financially. I always send a quick email to my wife at the end of the month to let her know how we are doing and if we are on track to nail the goals we’ve laid out. If we aren’t, we get together and talk about how we get back on track.

Finally, around Christmas time each year, we sit down and look at how well we did and then start to look ahead to next year.

I’d be lying if I said I don’t think about our budget every day. However, I’ve worked hard to train myself to check in on things no more than monthly and then have bigger discussions annually. I’ve found this to be a nice balance between locking onto bigger goals but not getting lost in obsessing over every purchase.

If you have questions about how to build a budget for your family or what goals make sense for you to include in your goal-based budget, please reach out to any member of our team and we’d be glad to connect with you.