Getting Started On A Family Budget
Are you ready to get started on a family budget? It can seem complicated at first – how do you categorize everything? What about expenses that fluctuate? The best thing to do is take a step back and look at some practical steps toward creating your family budget. Here are some tips.
Make it a Family Affair
Sometimes parents try to hide their financial situation from their kids and/or each other. While this may seem like “sparing” the ones you love, in actuality it can cause undue stress on the one family member who does know how bad things are, or how things work financially.
Call a family meeting to discuss finances. If you’ve never done a family meeting before, this is a good place to start. It may not be everyone’s favorite topic, but it’s an important one.Explain how your family finances affect everyone in the household. Be clear and specific, citing fees, tuition, allowances, groceries, etc. and how they all cost money. It’s easy to take things for granted.As you work to formulate your budget, work on common goals. Consider everyone’s wishes and come up with some realistic, common goals. Not everything is doable, of course; but finding creative ways to get everyone’s needs met is what family life is all about.
Estimate in Realities
Remember that your budget is a tool, not a dream. Goals are important, but a family budget should first focus on the numbers you’re dealing with. That’s the basic first step. Focus on the income and expenses at hand. Once you have a grasp on that, you can begin a bit more idealizing, such as saving for vacations, desired items, etc.
Start with Your Net Income
Figure out your net income for each month. This means your income minus taxes, insurance, 401K deductions, and everything that automatically comes out of your paycheck. If you are self-employed, subtract estimated taxes, insurance costs, retirement account savings, etc. At this point, you just need numbers. Once you have the totals you have your net income so you know exactly what money you have to work with.
Expenses – Keep Categories General
Next, figure out your monthly expenses. If they vary, figure out an average by looking at the last three to six months’ worth of expenses. For example, if your electric bill was $150 last month, $140 the month before, and $175 the month before that, then you can estimate a monthly expense of around $155 for electricity.
Keep your budgeting categories general so that you do not get overwhelmed. Here are some suggestions for categories:
- Payment off debt
- Home (mortgage, rent, property tax, insurance, repairs, etc.)
- Health Care
- Personal (eating out, hair appointments, etc.)
- Charitable giving
All of the numbers I like to keep in a budget book or online with a program like excel. You have two columns – income and estimated expenses. Now you need to add another column: actual expenses. Keep track of the real numbers each week over the next month and see how much/if they differ. At the end of the month, stop and take a look at what you’ve got so far. Are your expenses greater than your income?
I hope these tips help you create your family budget. Did I miss any tips that you have for creating a family budget?
I mentioned a Budget book or a program. Being visual person and being able to see exactly what I am spending and where makes it alot easier for me. Check below for a example of one of the budgeting sheets I use.
Free Printable Monthly Budget Worksheet