With all of the pressures of running a household, it can be difficult to find time to create a family budget. Sometimes it’s hard to know exactly where the money is going when the amount available at the end of the month is less than you expect. It’s important to look at household finances from closer because that’s the only way to control them; otherwise, they control you.
How do I start a family budget?
Even if you have a general idea of how much you earn and spend each month, budgeting can be time-consuming. On the other hand, it doesn’t have to be difficult. Using pen and paper can be just as usable as the fancy electronic budgeting tools, but online financial apps certainly make the job a lot easier. These tools are easy to use, intuitive, reduce human errors, and some of them are even available for free or for a reasonable fee.
Calculate Your Income
The first thing to start with when you planning your budget is to figure out how much money you’re bringing home every month. Add up all the income sources: your salary, side hustles, child support, etc. Don’t forget to deduct all the taxes or any other amounts that are deducted from you before the money arrives at your bank account.
Determinate your financial goal
Ask yourself what kind of improvements you want to see from making a family budget. Pay your utility bills on time and have some extra money at the end of the month? Want to improve your bad credit score or finally get out of your debt? Are you planning any big purchases? When you decide on your goal, write it down so you can remind yourself why it’s worth the effort to stick to your budget. When you creating goals together, you have to discuss the difference between wants and needs. Obviously, needs must be met first. This means you’re budgeting for housing, utilities, food, and transportation before family memberships to the international ventriloquist museum.
Get all of your income and spending data into one place
Calculating your expenses will help you better understand where your money is going. Start by accounting for your necessities such as rent, utility bills, car payments, and insurance. These are fixed expenses that must be covered on a monthly basis. Average at least three months to a year’s worth of bills to get an accurate idea of how much you’ll expect to pay per month. For eg, if your total in May was $130, $70 in June, and $80 in July, you can add these bills (130 + 70 + 100 = 300) and divide the total by the number of months (300/3 = 100). With this in mind, you can prepare for your utility costs at about $100 a month.
Look for ways to decrease spending
How much you spend each month on transportation? How much on clothing, health care, recreation, and charitable donations? What about dining out, entertainment, or shopping for gifts? You must organize all your variable expenses into categories to see where all that money goes. For all your variable expenses write the maximum amount you plan to spend in that category or the amount you expect your bill to be. For example, you might plan to spend $500 on groceries and $150 on gas. This can be made easier with an online Budget Planning Calculator. This free tool will help you to see where your money is going, and how you can save for the future. For example, instead of dining out for lunch, consider preparing food at home and bringing it with you to work, or use coupons while shopping for gifts.
Review your spending monthly
You should go through the budget at least once a month. Some people, though, like to do this on a weekly or biweekly basis. Furthermore, you should consider doing quarterly and annual budget assessments to fine-tune and measure the budget over longer time spans.