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FAMILY BUDGET
Saving with a family budget.
The best tips: how to draw up a realistic family budget.
Going from being a couple with two salaries to a family with one – that’s a big step both personally and financially and makes a realistic family budget very important. Discover how to draw up, manage and monitor an effective family budget.
Expensive housing, two leased cars and costly hobbies are fine for a couple with two incomes. Even with modest salaries, dual earners can afford a lot. But that changes suddenly when the couple becomes a family, and their income is noticeably reduced. If you continue making financial decisions based on impulse and don’t alter your fixed costs, sooner or later you’ll find yourself struggling. It’s difficult to lower your standard of living from one day to the next. So, it's best to start early if you are thinking of starting a family.
How to draw up a family budget in 3 steps
A budget should list all your income and expenses so that you can allocate your income optimally. Budgetberatung Schweiz provides blank budget templates for you to fill in. They’ll help you create a personal, customised budget.
Step 1: Enter current amounts
The template features four blocks for budget items: fixed costs, household costs, personal expenses and provisions. These are the standard expense items in ordinary private households. Regardless of whether your bills are due on a monthly, quarterly or yearly basis, calculate them all for the year and the month.
What does that mean? For example, divide your Serafe bill (radio and television licence fee), which is CHF 365 per year, by 12 months, and enter the result (approximately CHF 30) as a provision in the “monthly” column. This is the only way to see how far your income goes.
Start by entering all your income and expenses in the template. Then list further expected costs, such as dentist or education fees and expenses for things you'd like to have, such as holidays. You probably know the exact amounts you pay for rent, taxes and insurance, so they are easy to list. Household, clothing and other expenses can be estimated based on your spending in the past months or years, or you could refer to our sample budgets.
Step 2: Adjust
Ideally, your income and expenses should balance each other out or you should be left with extra funds. If your income falls short of your expenses, you should go through your budget again, point by point, and consider where you can save. If the difference is small, it might just be a matter of adjusting your personal expenses, which is something you can do straight away. If the difference is large, you might have to consider moving to a cheaper apartment or giving up your car to solve the problem in the long term. Alternatively, the shortfall could be offset by additional income.
Budgetberatung Schweiz has put together sample budgets for various life stages, household sizes and income levels. Some users may find these examples unrealistic. However, they simply show the direction you should be moving in if you don’t want your household to go into debt.
Step 3: Long-term perspective
Your civil status makes a big difference when it comes to money and provisions. Whether you are married or cohabiting, the way your income is split will affect your professional development opportunities and hence also your salary level. This will in turn have an impact on the division of roles, social insurance and pension provision.
Hence, couples should always use good times to arrange the things that might become difficult to arrange if things were to take a turn for the worse. What’s more, you should get neutral advice on employment contracts, contracts you enter with your cohabiting partner and other contracts if you are not sure if they are a good fit for you.
The fact is: if you stop to work in full or part in order to raise a family, you will have to absorb higher financial losses in the long term than your partner will. This applies especially in terms of pensions and even if you are married. This is especially true if your partner dies before you.
You should also know that shared parenting, where both parents work part-time, also has long-term consequences for social insurance and pension cover, which needs to be considered.
5 tips for saving money everyday life
There’s a great sale here and rock-bottom prices over there – the temptations in shops and online stores are huge. Take a step back and think carefully about whether you really need a product before you buy it. Special offers are where the greatest temptations and traps lurk in everyday life,
because they aren’t always cheaper. “Three for the price of two” is actually more expensive if you actually only wanted to buy one item.
The things shops want you to buy are usually displayed at eye level. You can usually find cheaper alternatives on the very bottom shelf or at the top.
How full is your wardrobe? Before buying anything new, ask yourself if you really need another sweater.
Throwing out leftovers is a waste of money. Make a point of no longer wasting food and create delicious meals with leftovers from time to time.
Planning ahead saves money: such as picking up an inexpensive gift for your next party's hosts. Take advantage of half-price and quarter-price offers.
Think twice about major expenses and ask yourself a few important questions before buying something:
Is this necessary and important?
Will we be contractually bound to someone for a long time?
Will we have to go into debt to make this purchase?
Would this purchase rule out projects such as unpaid leave or a professional development course?
You should critically examine anything that will curtail your flexibility in the long term. When sellers offer buyers substantial freedom, this often turns out to be disadvantageous – because it involves instalment payments or long contract terms, for example.
Buying something with your own savings is always cheaper than financing it with borrowed money, such as a consumer loan. If you pay for something later, it is always more expensive and complicated in the end. You should therefore weigh up big financial decisions carefully and discuss them with your family. That will help you to recognise potentially bad decisions and avoid conflict with your nearest and dearest.
A budget only makes sense if you keep an eye on it. Clearly define who in the family is responsible for which budget item. There are different strategies for keeping an overview: Some people put money aside in various envelopes. Others withdraw a certain amount every week or work with lists and apps.
If you don’t want to pay in cash, you can use debit cards, which means the payment amount will be taken directly from your account. If your account isn’t charged until long after your purchase, it’s much more difficult to keep track. Money is one of the most common topics of disagreements in relationships. If you are open with each other about your finances, this creates a solid basis for finding solutions together. In Switzerland, married people are required to be transparent with each other about such matters by law (Swiss Civil Code Art.163 / Art. 170).
Don’t hide your head in the sand if you can’t make payments on time or if you must keep overdrawing your account. Take these warning signs seriously before your budget gets weighed down further by late payment interest. Ask yourself how you can improve your situation:
Can you increase your income within a reasonable period?
Are you already receiving all the state benefits that you are entitled to, such as reduced premiums and birth, child and education allowances?
Are you really making the most of the savings potential in your budget?
«Creating and spending in line with a set budget prior to starting a family will give you plenty of time to adapt and get used to it. That will stabilise your family life enormously.»
Summary
A budget is not a straitjacket, but a practical support to channel your money to the places where you want it to be. If you have enough income to cover your living costs, your budget will help you meet medium- and long-term financial goals and avoid short-term temptations. If you review your budget regularly and make adjustments when things change, you can rest assured that your income will last until the end of the month. That’s a good feeling!
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