Everyone is feeling the financial crunch these days, and it seems like money matters are totally out of our control. That may be true on the large scale, but in day-to-day life, you have a lot of control, and one of the best ways to manage household expenses is to create a family budget. Once you have a clear understanding of how much money is coming in and how much is going out, you’ll be able to realistically evaluate your goals and priorities and exercise control over your finances.
Creating a Family Budget – Write Everything Down
Set aside an afternoon or evening to take the time needed to create a family budget. Using three months of pay stubs, bank statements, credit card statements, and utility bills, make two comprehensive lists: one of total income, the other of expenses. Try to account for every dollar made and spent, to get a sense of your overall financial situation and spending patterns. In addition to regular monthly expenses like mortgage, utilities, gas and groceries, remember to include home, health and car insurance, membership fees and other annual or quarterly expenditures. Once this is done, decide how much money needs to go to each fixed category every month. Be sure to include a category for “other” to allow for recreation and unexpected expenses. The goal is for income to exceed fixed expenses, so there’s money left for savings (for retirement, emergencies, vacations, major purchases, etc.). To organize your family budget, you can use a notebook, envelopes, create a spreadsheet, or purchase a family budget software program, whatever system works best for you. If your expenses exceed your income, it’s essential to find ways to reduce your spending. Pay careful attention to how much money is going to non-essential items and cut back wherever possible. Then cut back some more. By using your family budget as a concrete view of how you’re spending your money each month, you’ll be able to focus on priorities and see where you can make changes.
Creating a Family Budget – Helpful Hints on Savings
Savings are essential, both for future planning and emergency situations. There are ways to save money even during difficult times. If you can set up your paychecks to make automatic withdrawals into a savings or retirement account, do it, especially if it’s an employer-sponsored plan that offers a matching amount. On a much smaller scale, empty spare change from your pockets or purse into a jar each week, then deposit that money monthly into a savings account. You’ll be pleasantly surprised to see how it adds up over time. Consolidate your phone, online and TV services into one lower monthly payment. Buy used books, CDs, and DVDs – better yet, borrow them from the library for free. Limit your credit card spending as much as possible and make paying down your credit card debt a priority – the sooner the cards are paid off, the closer you’ll be to saving money.
Creating a Family Budget – Get the Kids Involved
If your children are old enough to earn an allowance, they’re old enough to learn about budgeting. There’s no need to include them in deep discussions about family finances – and certainly it’s not necessary to alarm them if things are tough – but instructing children about wise allocation of funds is an important lesson they’ll be able to use throughout life. If your child gets an allowance, show him or her how to create a budget along the same lines as your family budget. Set a specific goal (buying a much-wanted toy or DVD, for example) to illustrate how savings can net rewards.