Nanny Knowledge: Budgeting Basics
Budgeting can be tricky for anyone, but for nannies, it can be downright daunting. Whether figuring out for the first time how much you will pay each week in taxes or having enough money to pay for essentials between jobs, nannies often worry whether they will ever have “enough.”
Budgeting for taxes, emergencies, retirement and day-to-day living expenses—not to mention setting aside funds for some much needed R&R—can seem overwhelming if you’ve never done it before. But the fact is, budgeting is a helpful and necessary tool to get you where you want to go financially, both now and in the future.
Step 1: Estimate Expenses
At the beginning of the month, sit down and calculate how much money you may spend over the course of the month. Write down all your fixed expenses such as rent and cell phone, and estimate for expenses such as food and gas.
Step 2: Track Spending
As you whip out your wallet during the month, try to write down every penny you spend. Tedious? Yes, but it’s the only way to determine where your budget busting pitfalls are. Use an old-fashioned pen and paper, or a free smartphone app like Best Budget to jot down figures on the go. At the end of the month, calculate whether your actual spending is anything near your estimated spending. Most people find that they spend a lot more than they think they do, but this revelation is the key to making smart changes to your spending habits.
Step 3: Cut Down Expenses
If you spend more than you make, you’re not alone. According to a study by the Federal Reserve Board, 43% of Americans spend more than they earn. But you’re creating this budget to stop that bad habit and start saving for your future. Pore over your spending from last month, and try to determine what can be eliminated or cut back on. Call insurance companies to find a lower rate, cut back on your caffeine intake, try to save a few dollars wherever you can.
Step 4: Set Savings Goals
Once you’ve scaled back on spending, determine what you need to save for. Taxes, retirement and emergencies are the big three, but don’t forget the smaller savings goals like a vacation or a down payment on a car. The percentage of savings allocated to each savings goal will vary widely for each individual.
Step 5: Get Professional Help
To help you determine how much you need to save for the big three—taxes, retirement and emergencies— you may want to attend The Institute for Families and Nannies Financial Planning Workshop for Nannies in 2018. Financial Professional Sheila Schroeder will be on hand to give nannies and their friends a crash course in financial education.