Family Budgeting

The good thing about being an employee is that you know with certainty how much income you have every month. However, apart from annual reviews and increases - usually at the rate of inflation - there are limits to what most of us can do to greatly change our net income. So it is a matter of making the most of the family budget.

A good place to start is by planning a budget for how you will use your money. Does your family have one income or two? Consider whether you could save on fees by setting up a joint account. Decide whether to make minimising charges a goal in your budget strategy, e.g. by paying your credit card in full or selecting a low-interest credit card. A budgeting account, such as AIB's Masterplan Account, helps spread the cost of essential expenditure evenly over the year.

Check the terms and conditions of all your banking arrangements and make sure you avail of all the included extras. Depending on your home insurance policy, you may also qualify for a reduction on the cost of travel insurance by using the same provider for both policies.

Analyse your spending over the past six months, separating essential expenditure, discretionary spending, loan repayments and saving. Consider whether you’d prefer to shift some spending from one category to another.

Essential expenditure would include housing, childcare costs, household shopping, healthcare insurance, motoring costs and utilities. Ask yourself if you need to set aside some money for unexpected essential spending, for example car repairs, leaking roof, annual car tax or back-to-school expenses.

Try to get in the habit of reading all of your bills on the day they arrive and checking for any errors and unusual transactions. Set aside a certain time every week or month to review your budget, handle outstanding matters and adjust your financial plan if necessary.

Involve the family in the budget. Explain the value of economising in some areas to save money for treats. This is about the whole family sharing the same motivation to stick to the budget. For instance, the family may decide to skip weekly cinema visits in order to save towards a great family holiday.

Spend some time reviewing your savings. Are you in a position to save for an emergency fund for unexpected circumstances? Check that you, your family, property and income are all adequately insured. Homemakers with no direct income are frequently under- or uninsured. Apart from the emotional impact of the death of a homemaker, the cost of hiring a housekeeper is considerable; a life insurance policy would provide for this.

Think about the balance between your essential and discretionary spending. This is a very personal matter depending on the things you value most. You may adore some leisure pursuit and be perfectly happy to spend a larger part of your income on this and settle for a small car or house.

Finally, if you find it hard to make ends meet but cannot spend more time working outside the home, consider if you can make your home work for you. Under the rent-a-room scheme, where a room in a person's principal private residence is let as residential accommodation, and the gross annual rental income is less than EUR10,000 (applicable limit for 2008 and 2009) this income will be exempt from tax. Qualifying room rentals will not affect mortgage interest relief at source nor will it result in a stamp duty claw back. Principal Private Residence relief for capital gains tax is also unaffected.

Legal Notice

The information provided in this guide does not constitute tax, legal, investment or any other advice. Any figures quoted are correct as of publish date shown above and are subject to change.

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