A report issued by the Massachusetts Treasurer’s Office last year concluded that “many residents and families simply lack access to and awareness of the tools that they need to manage their money.” Yet experts say there are simple ways for families to avoid financial pitfalls and wasting money.

Creating a budget is the first — and best — step toward shoring up a leaky bank account. It’s an obvious choice, yet a budget can have a major impact on a family’s bottom line. A 2011 report from the Institute for Fiscal Studies found that households given money labeled “Winter Fuel Payments” spent 41% of those funds on fuel, compared to the 3% spent on fuel by households given unlabeled money.

Ultimately, budgets constitute what behavioral economists call “mental accounting,” an implicit way to earmark money that could be spent anywhere.

“Families should make a habit of creating a budget each year and reviewing it on a monthly basis to track their progress and to make certain they are able to live — and spend — within it,” says John Navien, a financial professional with MetLife Premier Client Group.

“It’s really just identifying costs and benefit, and doing the math,” adds Albie DiBenedetto, a market and education supervisor with American Consumer Credit Counseling.

Easily finding places to save money is another benefit of making a budget. “If you’re taking a close look at your comprehensive financial picture each month, areas where you’re wasting money should reveal themselves fairly quickly,” Navien adds.

The best way to do this is a simple eye test, DiBenedetto advises. for example: “If you find that you are not utilizing [your cell phone] services, you should evaluate the needs, contact your provider and see if you can lower your plan, and explore other options,” he says.

Simple Ways To Save
“Groceries can cost a family of four around $230 a week,” notes Katie Ross, education development and marketing manager at American Consumer Credit Counseling. “The best way to avoid wasting groceries and money is to plan your meals out weekly. Go to the grocery store with a list and buy only those items you need to get you through the week.”

While this may seem difficult, it needn’t be, she says: “Have the whole family help in planning the weekly meals.” This will provide not only quality time with the kids, but also meals that everyone will enjoy, resulting in less wasted food and fewer calls for take-out or dinners out — especially on busy weeknights.

Eating out twice a week can run between $140 to $210, or over $10,000 a year, Ross notes, but that doesn’t mean families have to abandon the experience all together.

“Stick to one night a week out and make it light,” she suggests. “Have a pizza or two delivered, and you’ll spend half the cost of going out to eat.”

If you’re a shopper, you can still scratch that itch, just put it in the budget.

“As long as you can build it into a budget — an allowance or some special treat — that is probably the biggest way of balancing [pleasure and responsibility],” DiBenedetto says.

Those who add Navien’s advice of waiting to make large purchases can solve two problems. This approach alleviates the potential of incurring greater debt immediately and allows people to plan larger purchases around retail clocks. For instance, according to Consumer Reports, February is the best time to buy workout equipment, discounted from New Year’s resolutions that never materialized.

Once they’ve created a budget and employed ways to eliminate wasting money, what should families do with those found funds?

“I would recommend that funds diverted from wasteful spending be used to pay down debt, create a rainy day fund, and save for retirement — in that order,” says Navien, who encourages families to build an emergency fund that would cover six months’ worth of expenses. However, he acknowledges, “it’s difficult to move forward with your financial plan when you’ve got debts dragging you down.”

5 Tips For Better Financial Health
Getting your financial house in order doesn’t have to be a burden. Follow these tips to establish a budget and begin building healthier money habits:

Account for incidentals. When listing all the people and places you owe money, it can be easy to overlook other expenses that really add up. Things like a work wardrobe, toiletries, and personal hygiene items are necessary purchases that should be reflected in your budget.

Expect the unexpected. Even the best-planned budget can fall apart when unexpected expenses arise. Ensure that you’re not only directing a sum of money to your savings account each month, but that you’re also earmarking some of that money for emergency car repairs, an unplanned visit to the veterinarian, or a critical home repair.

Don’t treat your budget like a bad diet. Like a crash diet, being too restrictive with your budget will leave you discouraged and exhausted — and maybe hungry. The key is to be honest with yourself about your spending. Look at your spending history — you might be surprised to see where your money goes. Be sure to set a reasonable budget each month that allows you to manage your finances without falling off the wagon.

Leverage rewards. It may seem counter-intuitive to use a credit card for expenses you don’t need to buy on credit. But if you use a cash-back rewards credit card for your regular essential purchases and even bills, you’ll have some extra income each month. Deposit those rewards in a savings plan or allocate them to help pay down debt each month. Just remember that this approach only works to your advantage if you pay the balance each month

Research all your money management options. A solid budget is the foundation of a good money management plan, but the type of accounts you use can also influence your financial situation. A financial advisor can help you understand the benefits and limitations of various types of checking, saving, and investment accounts, as well as other products to help maximize your savings and minimize debt.

— Primary Financial Group/Family Features