For singles, creating a budget is relatively easy. They tend to have a good handle on how much money they have coming in, and when tracking expenses, they only have their own to think about. But creating a family budget is a whole new ball game.
Most families today have multiple sources of income. And when there are multiple spenders, that makes things a little trickier when budgeting. This is one of the main reasons that families lack a ‘formal’ budget.
But having a budget and sticking to it can significantly improve a family’s financial outlook.
Here’s how to make a family budget:
- Take inventory of all income. If a particular source of income fluctuates from month to month, use the lowest amount or average it out.
- Keep track of all expenses for a month or so. Keep all of your receipts, and ask all family members to keep track of theirs as well. You’ll be surprised by what you’ll learn.
- Add up your monthly expenses. Be sure to include bills, debt payments, groceries, and everyday expenses such as lunch money and transportation costs.
- Get input from other family members to help determine which expenses are necessary and which ones could be cut down or eliminated. Maybe you could start taking lunch to work instead of eating out, or perhaps the kids have an idea that you may not have thought of.
- In addition to individual expenses, discuss how you can maximize savings on such things as the electric bill, groceries, and other necessary family expenses. Consider saving money by carpooling or taking public transportation, buying more generic foods, or even adjusting the thermostat a few degrees.
- Estimate how much you can save on regular expenses, and cut the completely unnecessary items out of the budget. Then refigure it and see where you stand.
- If you end up with a surplus, allocate a portion of it to savings or to a vacation fund. If you’re in the red, go back and rework the budget until you have more income than expenses.
One reason that family budgets often fail is that 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 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.
Creating a family budget can help keep spending under control, leaving more money to pay down debts and save for future goals. But to succeed, close monitoring is essential. Your efforts will be rewarded, however, with less financial stress and more money in the long run.