5 Simple Ways a Military Spouse Can Create the Family’s First Budget
Following a budget is hard work. Starting one from scratch is even harder. Maybe you’ve already got a monthly budget for your family, but you don’t follow it. Or, maybe you don’t have a budget at all and want to get out of living paycheck to paycheck.
It’s not impossible to create your family’s first budget. It’s actually quite easy. Following your budget is the hard part. Creating your first real budget is an eye-opening experience. You don’t even realize how much you spend on certain items. For example, a recent Instamotor poll found that over 10 percent of Millennials spent more than $200 per month on subscription services like Netflix, Spotify, Blue Apron and others. How many monthly recurring services do you subscribe to?
Subscription services are just one example of how a budget can change the way you spend, save and invest your family’s finances for the future. Here are five simple ways to help you create your family’s first budget in no time.
Understand the Leave and Earnings Statement (LES)
To create your first budget, you have to understand not only where you spend your money but also the exact amount of money that is coming into your bank account every month. As a military spouse, you have to be able to access your service member’s leave and earnings statement, also known as the LES (the military version of a paystub). You have to be able to decipher it as well. As a spouse, you should talk to your service member about having access to his or her myPay account online with the Defense Finance and Accounting Service (DFAS), the military’s payroll department.
The LES will not only tell you exactly how much money the service member earns on the 1st and 15th of every month, but it will also show you the amount of taxes, deductions, allotments, debt repayments and other expenses automatically taken out of his or her paycheck. The LES is the building block for your family’s budget. Every military spouse should be familiar with it, understand how to access it, and know where to find critical information on it in case there is an error.
Keep in mind, you will typically need a specific power of attorney to make inquiries or adjustments to your spouse’s military pay with DFAS during a deployment or extended training exercise.
List Your Expenses — Track Every Dollar
Not only should your budget include every source of income for your family, but it must also list all your expenses as well. Listing expenses is what everyone associates with budgeting. When you create a budget, you should have a list of all your fixed expenses that don’t change every month like your rent, mortgage, car payments, insurance premiums, cable, Internet, savings, investing and the like. You should also go through your past expenses and get an idea of your variable expenses which change slightly each month. Variable expenses run the gamut of credit card payments, electric and water bills, eating out at restaurants, shopping, groceries, clothing, gas and a host of other monthly payments.
Don’t leave anything out. Make sure you account for every dollar your family spends each month. Don’t forget to also include random things that don’t occur every month such as gifts for friends and family, car repairs, home repairs, and veterinary bills for your pets.
Now that you have looked back over the last couple of months, you can organize your discretionary monthly expenses into categories. You should have categories such as entertainment, shopping, clothing, etc. These categories will help you to set a ceiling on the amount you can spend each month.
You have to write your budget down. You should always have a monthly written budget where you’ve assigned every dollar of income to a bill or spending category in your budget. After a few months of tracking your spending, it will get easier. You can then go back through and adjust your budget to more accurately reflect what you spent and where you want your spending patterns to be in the future.
Set Your Savings Aside First
Most people forget about saving for a rainy day and investing for retirement as well as other financial goals when they create their first budget. Most people who are just starting out or living paycheck to paycheck think that they can’t save for retirement or build up their emergency fund. But, I’m here to tell you that you can’t afford not to.
You need an emergency fund. Your emergency fund needs to be three to six months worth of living expenses. Members of the military and their families are often able to err on the low side of this rule thanks to the job security of the military. But, if you’re about to transition from the military, you need a fully funded emergency fund of six months of living expenses. The rest of us on active duty should aim for at least three months.
Start including an emergency fund in your family’s monthly budget. You can start small and ramp it up. Start by setting aside as little as $25 a paycheck into a separate savings account. Most banks now also allow you to change the name or to nickname an account online. Make sure you clearly list this savings account as your family’s emergency fund.
As you get more comfortable with your budget, look at ways you can cut other expenses and boost the savings category of your budget. Can you squeeze out $35 a paycheck next month? What about $40?
And, after you’ve built up that three months of savings in your emergency fund, you should look to your retirement planning as well. Start investing for retirement the same way that you tackled your emergency fund. Surely there is somewhere in your budget that you can find another $25 to invest for retirement.
Identify Your Family’s Goals
Believe it or not, your goals drive your family’s monthly budget. Do you want to save for a family vacation this summer? It needs to be in your budget. Is saving for retirement a priority for you? It needs to be in your monthly written budget.
What we spend our money on is a direct reflection of what we value. If you value spending time with your family eating brunch on Sundays, that’s fine. Just make sure that you include it in your family’s budget. Of course, brunch on Sundays may mean that you will have to make trade-offs on other items in your budget. Maybe you don’t go out to the movies as many times as you’d like because you want to go out to eat at restaurants more. Your budget is a series of conscious decisions you make that value certain expenses over others. The trick is to be conscious about your spending choices.
Include Your Service Member in the Conversation
Finally, as you look to create your family’s first budget, make sure that you include your service member in the planning. You can’t create your budget in a vacuum. One great way to include your spouse in your family’s budgeting plan is to hold a monthly budgeting meeting.
Your family’s monthly budgeting meeting is the perfect time to look back at your spending over the past month or two. Did it match what you thought it would be like on your previous month’s budget? Probably not. Now’s the time to make adjustments for the next month going forward. You want to try and make your budget as accurate as possible, but every month you’ll need to make tweaks to next month’s budget. It’s a continual process that you will get better at every month.
Creating a budget is hard work the first time you try it. It takes effort and consistency. But, it’s worth it, and it gets easier the more your do it. With a budget, you can get out of living paycheck to paycheck and take control over your family’s finances as well as start focusing on your goals. Through a solid monthly budget, you can align your family’s spending with what’s truly important to you and your loved ones.
So, what’s holding you back? Why doesn’t your family have a budget? Do you need a budget template? Shoot me an email or send me a message on Twitter @MoneyQanA and I’ll be more than happy to help you create a budget for your family.
About the blogger
Hank Coleman is a major currently on active duty in the U.S. Army and a freelance writer who focuses on personal finance, investing and retirement. Hank holds a master’s degree in finance and runs the popular personal finance blog, Money Q&A. His writing has been featured on sites such as AOL, The Motley Fool, Military.com, Seeking Alpha and many others. You can also follow him on Twitter @MoneyQandA.