8 Easy Budgeting Tips Every Parent Needs

Jody Shiermeier wanted to have a third child, but the O'Fallon, Illinois, mom of two realized that she and her husband, Todd, had to make significant changes first. "We needed a bigger car, but we were barely making ends meet as it was," she says. "I knew if we were going to have another child, we'd have to find a way to afford it." So the Shiermeiers created their first budget. They wound up saving enough to pay half the cost of a new minivan up front (keeping their monthly payments below $200) and to welcome a new baby within two years.

Budgeting is a bit like flossing your teeth--you know it's good for you, but you tend to skip it anyway. More than half of all adults "wing it" rather than tracking how much money is coming in and going out, according to the nonprofit National Foundation for Credit Counseling. But as with that oft-overlooked aspect of dental hygiene (49 percent of Americans don't floss daily), having a plan in place to make sure the money coming in equals--and ideally exceeds--the money going out every month makes a huge difference.

It not only enabled the Shiermeiers to expand their family but also provided them with a sense of security. "Now I don't have to be scared of the next unexpected bill," Jody says. If you've been putting off budgeting, here's a tip to ease you into things: "Ditch the word budget," suggests Patricia Seaman, spokesperson for the National Endowment for Financial Education (NEFE), a nonprofit organization in Denver. "It's like 'diet,' which makes you feel restricted." You'll have a more positive outlook if you call it a "spending plan." Follow our three-step plan to make the process far less daunting.

1. Guesstimate Your Monthly Expenses
Forget about scratching notes on a legal pad. There are a slew of online calculators that will help you organize and update your financial information in minutes. Begin by determining your fixed expenses (such as your mortgage or rent, car payments, college and other loan debts, and child care) and your flexible expenses (costs that change every month, such as food, health care, and entertainment). While you can pull some of the info from your monthly bank and credit card statements, this also requires you to come up with ballpark estimates by category.

Be as honest as possible. If your kid's playdate snacks cost $20 each month, avoid putting down a lesser amount because it looks better on a balance sheet. And make sure you include any "fun money" you use to pay for manicures, movie tickets, and dinners out. There's no need to feel guilty about these expenses. After all, your cash isn't only meant for boring things like bills.

Don't let the preliminary numbers freak you out. At this point all you're doing is gathering information. "Seeing the many places your money needs to go can be scary," says Jordan Amin, Chair of the American Institute of Certified Public Accountants' National CPA Literacy Commission. "But once you have a system in place, you'll feel so much more in control."

2. Track Every Purchase
It's time for the hard truth. Chances are, there are a bunch of ways you fritter away hard-earned cash that you're not even aware of. If on a typical day you grab a sandwich from the deli, buy your daughter a treat after school, and spring for a car wash when you fill up at the gas station, you could easily be overlooking $20 that didn't get tagged. That can really add up over time. So for at least a week (or a month if you can), log every single cash purchase you make. "It's those little bits here and there, like coffee drinks and toys at the checkout counter, that can sink a budget if they're not accounted for," says Jody. "Every dime and every dollar spent must be counted."

Sounds nitpicky? It's not. "You need to have all the numbers in front of you, or else you'll never develop a realistic budget for your family," explains Jameel Webb-Davis, a financial organizer in Medford, Massachusetts.

How to Make a Spending Plan

3. Mold a Spending Plan
At the end of the designated time period, gather your receipts, divide them into categories (such as utilities, gas, entertainment, etc.), and compare them with the amounts you got from Step 1. You'll probably see a considerable contrast between the "predicted" and "actual" amounts. "Most people think they're spending money on necessities and don't realize how much is going to iTunes or soccer gear," says Webb-Davis.

Now that you know the real deal, deduct your total expenses from your take-home income. This will give you an accurate picture of what's coming in and what's going out. If you're in the black, good work: You should be setting aside six months' worth of expenses toward an emergency fund and another 10 percent of your income toward savings. Can't swing that much? Even $100 a month is a decent start. "Set up an automatic deposit to your savings account," suggests Amin. "You can adapt very quickly to having less money in your checking account to spend, but waiting until the end of the month to move it over is hard to do."

If you're running a deficit, it's time to get to work. Using one of the online calculators, figure out how much you'll need to reduce your spending to break even (or even save a little). Then decide how much you can cut from each flexible category. "Even expenses for necessities like food can be tweaked," says Amin. "You can change recipes, clip coupons, or use up stuff in your pantry that's been sitting there for a while." Try buying cheaper cuts of meat and using a slow cooker to tenderize them. Buy clothes at a consignment shop. Consider dropping one of your child's after-school activities.

If that sounds intimidating to you, you're not alone. One out of four parents with young kids opt not to track their money because "it's too depressing," according to an NEFE survey. But experts say that creating a spending plan by category can actually lift your spirits. "It feels a lot better knowing you've got too many expenses than being in the dark," says Seaman. "Having the knowledge and the control to make changes is very empowering." So are these great budgeting, er, "spending plan" suggestions.

a. Put in the work up front. "It takes a bit of time to break down where your money is going and to set up limits by category," says Brynn Boyd, a mom from Rochester, Minnesota. "But after that, it's not a big deal at all. We check in a couple times a month to see how we're doing. If we have a cushion for, say, going out, we'll grab a bite at a restaurant. If we're close, we'll eat in." Budgeting has enabled Boyd to stay at home with her baby—and to establish a family vacation fund.

b. Make automatic payments. Set up regular bank transfers so your fixed expenses are always paid on time, saving you both stamps and late fees. Stagger bills so you always have enough in your account to cover them. If you know your son's preschool fee is due on the first of the month, set up a car-loan payment to be withdrawn on the 15th. Try adjusting your mortgage payment so that the money comes out of your account the day after you get paid.

c. Curb your impulses. See an item you really want? Follow the approach of Erin Monahan Weisberg, a mom in East Greenbush, New York: "I stare at the object for a moment, and if I am not in love with it, I walk away. If I don't think about it again after I've left the store, I didn't really want it that badly in the first place."

d. Get creative. Having a spending plan doesn't mean you need to eliminate every diversion from your lives, but it may inspire you to come up with less-costly alternatives. Rather than taking your family to the theater, have a themed movie night at home--watch Honey, I Shrunk the Kids and make it even more fun by serving baby corn and mini burgers, and milk in shot glasses.

e. Don't blow off the little things. Something as minor as reducing your thermostat to the lowest comfortable setting during the winter months can have a major impact on your home expenses. For every degree you set it above 70 degrees your heating cost increases by 7 to 10 percent, according to Progress Energy, a utility company that services the Carolinas.

f. Be consistent. "When I go to the ATM, I always take out the same amount," says Weisberg. "Then I dole it out to myself as needed, so I'm aware of exactly how long it lasts." When she spends it more quickly than usual, she knows it's time to reconsider purchases for the rest of the time period.

g. Keep it up. Once you see the tremendous benefits of tracking your money, you won't want to return to your old way of "managing" your finances. "I'd never live without a budget again," Jody Shiermeier says. "If we won the lottery tomorrow, I'd still stick to one. It's that important to our family's peace of mind."