Starting a Family Budget

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budgetingIf you like to know where your money is going or are trying to cut back a bit to save for something special, a budget may be a fantastic idea for you.  I personally created our budget so we could avoid lifestyle inflation and throw the extra money towards our long-term goals.  Families may want to create a budget to cover all of the normal expenses and family extras while still saving for long-term goals like retirement.  Either way, a budget helps you stay on track.  Here is how to start creating a budget like mine.

Track Your Income and Expenses

The first step to making a successful budget is to know how much you have coming in and going out.  First, keep up with how much your income is bringing in to work with.  Then, I would highly suggest tracking every single expense you have for an entire month to get an idea of areas you may want to cut and to set realistic targets.  Also try to write down all of the non-monthly recurring expenses too so you know what you’ll need to set aside each month to cover them.

For example, when creating your family budget, remember to include a monthly category for annual expenses like home owner’s insurance.  We needed $3600 a year set aside for all of our property taxes and $840 set aside every year for our home owner’s insurance.  That meant we needed to save $300 a month for taxes and another $70 a month for the insurance.

Compare Your Income and Expenses

Once you have a record of everything you spent and earned, you can compare the two totals to see where you stand.  If you are spending more than you are earning, you are going into debt or eating into your savings.  If you are earning more than you are spending, you have the flexibility to save for your future or to pay down current debts.  A family bringing in $75,000 a year may sound better off than a family bringing in $50,000, but it really depends on which family has the largest gap between what they bring in and what they are spending. 

Determine What to Cut

If you categorize all of your expenses, you can easily look down that list and be able to tell where most of your money went.  Fixed expenses, such as the mortgage or child care payment, may not be easily modified, but you can definitely cut back on your variable expenses pretty quickly.  I’d highly suggest cancelling any services that you do not regularly use or need.  The first step is to handle giving up the easy spending before looking into harsher cuts.

Increase Your Income

If you are not willing or able to cut back on your expenses but would like to have more extra money at the end of the month, look into increasing your earnings.  Part-time jobs around where you live can be turned into pretty easy money.  You could also consider turning a hobby into cash or even sell some of your own stuff to sock some money away.  For example, if you are a stay at home mom and don’t mind the idea of babysitting, taking care of one extra child during the weekdays can be a good way to bring in more than $250 a week!

Create the Budget Itself

Once you have a record of your income, expenses, and what you are aiming for overall, you can create a simple budget on a piece of paper, in a worksheet, or at a ton of places online for free.  The trick is to set realistic targets for each category of spending and to never overestimate how much you will be banking throughout the month.  You will still need to track your spending for every category to make sure you are staying within the budget you set, but it will be much easier knowing that you have a plan.

I personally love budgeting and hope it helps your family too.  Good luck!

How did you go about creating your family’s budget?  If you don’t have one, what system works for you?

(Photo: rmgimages)

{ 15 comments, please add your thoughts now! }

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15 Responses to “Starting a Family Budget”

  1. Eric Poulin says:

    I find that when estimating the amounts for your budget, its best to OVER-estimate costs and UNDER-estimate income. That way, you plan for the average-worst case scenario and, hopefully, any mistakes in your estimation are bonuses in your favor.

  2. Dave says:

    It’s so important the people make and stick to budgets, especially if you’ve got kids. You have a responsibility to take care of them, and giving them a sound financial footing is a requirement.

    • Shirley says:

      I so agree with you, Dave. Giving kids a sound financial understanding is an important part of raising them and if you don’t, you had better be prepared to be their caretaker for a good long time or see them flounder needlessly.

  3. Nate says:

    “…you can create a simple budget on a piece of paper, in a worksheet…online for free.”

    This can be helpful to find online. If you have a budget template, this can help you have a blueprint of sorts to follow. You should use a format that works for you.

    Here is a list of free budget templates if you’re interested:

  4. Shirley says:

    I created a sample budget for a young couple, using excel, with specific headings for income and monthly outgo and plenty of blank lines for other expenditures. He balked at the thought of entering EVERY purchase and what it was for and felt that just seeing what was left over at the end of a pay period was good enough… until there was nothing left over.

    Now, a year or so later, they are back on their feet and I see that he is advising his younger brother to use this sample budget. Mission accomplished!

    • I’m so glad it worked out! I helped a close friend set up a budget last month…I really hope it is helping but we aren’t getting together again for a couple of weeks.

  5. Alex says:

    Meeting once per week to go over family budgeting is a great way to get closer to your kids. Most families let their financial situation go unspoken. Check out my website’s personal finance section for some handy spreadsheets that anyone can use.

  6. Annie says:

    It is an excellent idea to have a budget. It lets you see where you are spending and/or wasting money. This tool also helps you save for the future.

  7. PlayVT says:

    My family (mostly me) uses a budget. I show it to my spouse often in the attempt to gain “buy in” with the idea. What I find useful, is to include savings goals into the budget beyond retirement. Our 401(k)’s, IRA’s, and 529(b)’s are automatic and not part of the budget. We have monthly savings in the budget designated for (1)car savings, (2)home improvement, and (3)vacation. We are pretty good at sticking with the plan and it gives us something to work for.

  8. We actually need to revise ours since things have changed. Once we get it together, we can reevaluate and see what should stay and what can go.

  9. Aaron says:

    Budgeting is such an important part of Financial Freedom and being debt free. So many people live paycheck to paycheck and really don’t know where their money is going. Business have a budget and families need one to.

  10. skylog says:

    this is one of the last things i need to do to get myself in better financial order. i do not have a family, but it is something i have been meaning to do for some time.

    i have saving, investing, smarter spending…etc..and many other aspects set in place but really need to put myself on some kind of budget. i want to be able to maximize what i have going forward.

  11. Cindy says:

    This is a great article with lots of information. My question, is how do you start? I get paid bi-monthly, so should I wait until the 1st of the month? Its difficult to start when one paycheck a month is for the mortgage 🙁

    Any advise would be greatly appreciated!

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