Creating a budget is relatively easy for singles. A bachelor or a spinster tend to have a good handle on how much money they have coming in and going out. And when tracking expenses, they only have their own to think about.
Most families have multiple sources of income. And when there are multiple spenders, that makes things much more confusing. This is one of the catalysts for families lack of formal budget. Nonetheless, having a budget and being discipline about it can greatly improve a family’s financial status.
Take inventory of all income. If a certain source of income fluctuates from month to month, use the lowest amount or average it out.
2. Expenses Tracking
Keep track of all expenses for a month or so. Keep all of your receipts, and ask all family members to turn theirs in to you each day.
3. Compile Expenses
Add up your monthly expenses. Make sure you add all debt payments, groceries, bills and everyday expenses such as transportation costs and lunch money.
4. Trim Budget
Get the family together and discuss ways you can trim the your household budget. Getting ideas from other family members will help you determine which expenses are necessary and which ones could be cut down or eliminated. Maybe you or your spouse could stop eating out and start taking lunch to work instead. Also, you can check whether the the kids can drop an extracurricular activity.
5. Trim Bills
In addition to individual expenses, discuss how you can cut down on the electric bill and other necessary family expenses. Consider things like taking public transportation instead of filling up gas for an individual outing. You should also consider buying more generic foods and adjusting the thermostat.
6. Estimate Savings
Estimate how much you can save on regular expenses, and cut the completely unnecessary items out of the budget. Then re-figure it and see where you stand.
7. Save out of Surplus
If you end up with a surplus, allocate a portion of it to savings. If you’re in the red, go back and rework the budget until you have more income than expenses.
8. Being Realistic
One reason that family budgets often fail is because they’re just not realistic. It’s great to cut down on expenses, but sometimes we tend to go too far. For example, cutting entertainment out of the budget completely might look good on paper, but we all need a little diversion every now and then.
Instead of cutting such things out of the budget completely, consider finding ways to lower the cost. Going back to the entertainment example, maybe you’ve been going to dinner and a movie as a family twice a month. But eating in and renting a new release would be much cheaper, and you would still get to spend quality time together.
Individual expenses can also be tricky. This can be resolved by allocating a certain amount for each family member to spend each week. If anybody should spend his/her entire amount before the week is over, they should reevaluate their expenses and adjust if need be.
In conclusion, creating a family budget can help keep spending under control, leaving more money to pay down debts and save for future goals. But in order to succeed, close monitoring is the key. Your efforts will be rewarded, however, with less financial stress and more money in the long run.