A budget is a useful tool to keep family finances on track. It can take a bit of trial and error to arrive at a system that works for the whole family, so it may be tempting to stick to the same budget for years. Realistically, however, both individuals and families go through numerous changes that can require a budget refresh. Here are some instances when it’s a good idea to update the family budget.
When the family grows
Families are dynamic and households can grow in many ways. Couples may become parents or foster parents, a relative may temporarily move in, grandparents may move in permanently. These scenarios may mean a change in family expenses and income. Having children especially can mean big-ticket expenses, such as childcare costs or a new family-friendly car in addition to day-to-day items such as clothes and toys. Revising the budget can help families prepare for the financial changes that come with growth.
When income increases
“One of the great things about a new job, side hustle, or promotion is the increased income these changes can bring,” says Omaha-based based Financial Advisor Nick Onken. “A budget refresh can ensure families are enjoying their money while also saving and investing adequately. More income can allow for more leisure activities, like travel, eating out, or the occasional luxury purchase.”
Families may also decide to invest more, add to their emergency fund, pay down existing debt, and increase their whole life insurance or universal life insurance coverage to cover their new, higher income.
After a big move
Moving to a new location can impact finances significantly. Rent may increase or decrease; the cost of groceries and utilities may change, too. These factors can shake up a family budget – in fact, moving expenses may have dented a family’s savings or emergency funds already.
“Most people will try to calculate the cost of living in a new town before making a move, but it may be difficult to get exact figures for an accurate budget beforehand,” says Onken. Living in the new city or suburb for a few weeks can give families an idea of what their monthly expenses will look like, so it can make sense to work on a new budget within a month of moving.”
Adopting a pet
Pets can bring tremendous joy, but many people underestimate the cost of their care. Dogs and cats require basic necessities like supplies and food; they can also come with other expenses, such as grooming, training, and vet bills. Welcoming a pet into the family requires financial preparation, so consider updating the family budget before bringing one home.
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) and its subsidiaries in Milwaukee, WI.
Source: Northwestern Mutual