Many American families have hard-time budgeting what they earn every year. Some of these families complain that they don’t make enough money from their business or jobs. Some complain that they only get just enough to keep themselves afloat every year. However, this shouldn’t be the case. Let’s look at the average annual income of an American family ($68,000) and compare it to the average household budget for a standard American family ($63,000). We can see that the average earning of a typical American family is more than enough to sustain them every year.
You might ask, what about accidents? Or things that we can’t predict. Well, the household budget we gave earlier already took that to account. It’s hard to admit that the real reason why we complain about how much we earn is that we spend it on unnecessary things that we don’t need.
It’s time to control our income. This article should apply to many families out there. It can also apply to some middle-bracket earners who earn between $50,000 to $60,000 every year. Here are some ways to save and budget the income you get from business or work.
Hire an Expert
Let’s get the obvious solution out of the way, and that is hiring an expert. Hiring a budgeting consultant or an investment consultant can help you manage your finances both at home and in your business. These are vital experts who can radically change how you live and budget your money every year. You can miss out on many budgeting ideas by not hiring these people at least once in your life. If you’re a family that tends to overspend every year or a family with little to no savings, you should consider hiring these experts to help you out.
Have Different Bank Accounts
Some families in the US tend to put all their eggs in one basket. That means their pay, their investments, and their savings are all in one bank account. This affects the transparency you need to budget your money. The cash you have in this singular bank account is being used for a variety of many things, so you can’t exactly tell where they are being spent on. This makes it hard for you to track the money you spend and how much you should budget every month. Additionally, this means that you’re missing out on the best interest rates that the economy currently has on offer.
Having different bank accounts can help you manage your money more. Some families opt to have bank accounts for various purposes, while some distinguish their bank account between savings and expenses. By the end of the day, both approaches are better than having a singular bank account. Once you have different bank accounts, it’s time for the next step, calculating your expenses.
Many families don’t even dare look into their expenses. It’s either they’re too scared to see how much they spend every year, or they’re too lazy to do it. Some argue that they don’t have the right tools for the job. Well, it’s time to throw those excuses out of the window because, first, there are tools on the internet that can help you with this. Second, you need to know your expenses when you want to budget. Lastly, you only need to do this once a year for it to work.
Before you calculate your expenses, you’re going to need to have a benchmark. A good benchmark is the average household budget of an American family we have listed earlier. Your expenses should be less than $63,000. If it’s above that, then you’re doing something wrong. If it’s below that, then good job, but remember there is always room for improvement.
Once you’ve calculated your expenses, then you’re going to see some things you might have noticed years before. Some of them come in the way of subscriptions that you might not be using. Some may come from daily activities that you weren’t aware actually cost a bit of money. This is the benefit of calculating your expenses. The next and last step is creating a budget plan.
If this is your very first budget plan, know that it’s destined to fail. Budget plans tend to be better over time once you have gained some financial experience. A simple budget plan only includes you not going over the red. For the average family, this is spending $5,250 every month. You can go a bit higher than that or a bit lower. Now that you have calculated your expenses, you can see whether you can reach that budget or not.
A complicated budget plan includes a bit more finesse. If you have an ongoing investment or running a business, you’re going to have to add that to your budget plan. You can use a return-on-investment calculator or maybe your business accountant to help you out with this.
It can be quite hard to handle your financials the first time. However, the reward you can get out of this can determine your family’s life in the future. Remember, it’s okay to fail the first time that you do this. Remain consistent with your budget plan, and you should be saving money in no time.