How to Make a Family Budget

If you read the title and are still here, then you know how important having a family budget is. If you aren’t here, well, you know how off-putting and even scary the whole topic is.

For those who are single, making a budget is fairly straightforward. They know how much money is coming in, and they only have to keep track of their own expenses. They might not like making and keeping a budget, but compared to those creating a family budget, they’ve got it pretty easy.

Family budgeting is a whole different ball game. There may be multiple sources of income, and there are almost certainly multiple spenders. It can all get pretty messy and confusing pretty fast, and that’s one reason many families don’t have a real budget. But uncomfortable though setting up a family budget might be, creating one and sticking with it can make a big difference in your family’s financial future.

The Plan

As I mentioned, setting up a family budget can be a bit confusing, but that doesn’t mean it can’t be done. As with so many things, it’s easiest if you take it step by step, in small bites. Here’s how:

1. First, list all of your income. Do it as an inventory by source, don’t just fill in the gross sum. If one of your sources of income varies from month to month, take an average or, to be really safe, the lowest amount.

2. For the next month or two, keep a record of all of your expenses. This can be sort of a nuisance (and you may have to work to get everyone “on deck” with it), but the little bit of extra effort will pay off in the long run. Every day (the key here is keeping up with things) track your expenses and have your family members give you theirs, too.

3. Add together the all of the monthly expenses. Try not to forget anything. Include bills, debt repayment, groceries and household expenses, and little everyday things like parking or bus fare and lunch money. It may seem insignificant, but it all adds up.

4. Now that you’ve got the hard cold truth in front of you, get the family together because it’s time to talk about ways you can “tune up” your budget. Look at your expenses and decided which ones are really necessary and which ones can be cut or at least reduced.

Most family’s have a lot of “fluff” in their spending, so you may be surprised at what kind of reductions are possible. Could you carpool or take the bus to work? Does your child need all of those extracurricular activities? Do you really need that many shoes? (That last one is a joke. Well, sort of.)

5. Besides individual expenses, take a look at the bigger family or household ones, too. Could you cut your electric bill or save on your groceries. Lots of expenses we take for granted are ones that have “evolved” over time and only seem like necessities now. For example, consider your phone plans and your television service.

6. Reassess your expenses to get a picture of how things could look. If you’re budget still isn’t looking the way you want, have another round at looking for ways to save. This can be uncomfortable, but it can also almost be a game. This process is meant to improve your family’s life, so emphasize that; don’t make the experience seem like punishment.

7. Continue this process until your budget is out of the red. Your goal is to end up with a surplus. (Yes, some people do have surpluses at the end of the month. Don’t you want to be one of them?)

8. Finally, allocate a part of your budget surplus to savings. Having savings is a great thing…and a great feeling.

But It’s Not Working . . .

Okay, so let’s assume you and your family did your homework, but now you’re finding that your family budget isn’t working. Whatever you do, don’t throw in the towel!

Take another look. Many family budgets fail because the family was too enthusiastic and the budget they created wasn’t realistic. Don’t cut everything just because it looks good on paper. For example, did you cut family entertainment? Well, reconsider it. Your family (well, most of it probably) is human afterall. A lot of budget cutting can be accomplished by trimming: Don’t give everything up; find less expensive alternatives.

Finally, don’t forget that everyone needs their own money. Money that they can do what they want with without asking for permission or having to explain. Even young children can benefit from this: It’s a good, small-scale way for them to get into the habit of budgeting and planning.

Making a family budget can help you get a handle on your income and expenses. It can help you find the money to pay down any debts you may have as well as save for the future. It’s not really that difficult, but it does require upkeep; you must monitor your budget regularly and frequently. It will all be worth it when you discover that in the long run, you have both more money and less stress.


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