Recent economic circumstances can teach us a thing
or two about the importance of being on a family budget. We take a look at some family budgeting basics.
Some people don't budget because they don't realize the purpose of
family budgeting. The best reason to be on a family budget is to keep
track of your family’s income and expenses. It’s much easier to see
what’s coming in and going out when you put it in a family budget plan,
rather than keep track of it in your mind. Budgeting helps ensure you're
not overspending and that you're making the best use of the money
that comes into your home. If there are spending leaks, creating a budget
can help you figure out where the money is going. Budgeting also helps
you plan for major financial goals like vacation and holiday spending.
To start creating your household budget, add up all your income for the
month. Multiply weekly pay by 4 and bi-weekly pay by 2 to come up
with the monthly income. Include any alimony or child support you receive.
Include dependable sources of income only. That way you’re not basing your
budget on money you might not receive.
Total the household expenses. Write down all the things your family spends
money on each month. Then, list the amount you spend on those things.
Expenses go beyond utilities and other bills. Your family budget should include
other types of spending like groceries, transportation, entertainment, etc.
Remember, to write down all the things your household spends money on to
get a complete picture of how your family is spending money. The small amounts
of money you spend when you order checks or buy something out of a vending
machine may seem insignificant at first, but they can add up over time.
Don't forget to income irregular and variable expenses.These are those expenses
that aren't due every month, like insurance premiums and property taxes. You
should continue to include these things in your monthly budget and set aside the
money for expense so when it's time to pay, you don't have to break the bank to
cover it. If it's a semi-annual expense (due every 6 months), divide the total amount
due by 6 and write that into your monthly budget. Or, if it's an annual expense
divide by 12.
Bring your net income to $0. Your net income is the total of your expenses
subtracted from your income. If net income is a negative number, then your
expenses exceed your income. You should cut your spending in
some areas to keep from overextending your family budget.
On the other hand, if net income is a positive number, you should put the
extra in savings or use it to pay off debt or both. Once you have a
zero net income, you know all your family’s money is accounted for.
Don't forget to save. An important part of your family's budget is putting
money aside for the future. Not only should you save and establish an
emergency fund, you should also save for retirement, college tuition, and
even the annual family vacation. You’re more likely to contribute to savings
if you include it in your family budget planning, rather than not.
Track your spending. At the end of each month, review your spending to
see if you followed your budget. If you went over in some areas, make
sure you included enough money in your budget for that area. Otherwise,
be more cautious next month to make sure you don’t overspend in that area.
The trouble with overspending your budget is that you may not have enough
money to meet all your financial obligations. If you notice that you’ve overspent
in one area, you’ll need to cut back in another area to keep from spending too much.
It's ok if your family budget changes. In fact, your budget should change,
especially as your family changes. Updating your budget helps make sure you
continue to make the best use of the household's income by planning appropriately
for your future expenses.
