7 Simple Steps To Create a Family Budget

August 15, 2009 by Monica
Filed under Misc

Creating a family budget is different from what you used to do when you were single. For singles, or single parents with a single child not spending on his own, creating a budget is relatively easy. Notwithstanding, for larger families it could get really confusing.

Most families have multiple sources of income. And when there are multiple spenders, it gets even more confusing. This is one of the main reasons that families lack a formal budget. However, sticking to a formal budget can efficiently improve a family’s financial outlook.

In spite of having a family of two, we already need a sort of organization that fits better for a “family” rather than a “single”. The following steps are an outline of a simple and effective way to make a family budget, that is suitable for both small or large families:

1. Take inventory of all income. If a certain source of income fluctuates from month to month, use the lowest amount or average it out.

2. Keep track of all expenses for a month or so. Keep all of your receipts, and ask all family members to turn theirs in to you each day.

3. Add up your monthly expenses. Be sure to include bills, debt payments, groceries, and everyday expenses such as lunch money and transportation costs.

4. Get the family together and discuss ways you can trim the budget. Getting input from other family members will help you determine which expenses are necessary and which ones could be cut down or eliminated. Maybe you or your spouse could start taking lunch to work instead of eating out, or maybe the kids can drop an extracurricular activity.

5. Discuss how you can cut down necessary family expenses. Consider such things as carpooling or taking public transportation, buying more generic foods and adjusting the thermostat.

6. Determine how much you can save on regular expenses, cutting the completely unnecessary items out of the budget. Then refigure it and see where you stand.

7. Hopefully, after cutting on unnecessary expenses, you’ll end up with a surplus. Allocate a portion of it to savings. If you’re in the red, go back and rework the budget until you have more income than expenses.

A word about being realistic

One reason that family budgets often fail is because they’re just not realistic. For example, cutting entertainment out of the budget might sound good but not doable in real life.

Instead of cutting such things out of the budget completely, consider finding ways to lower the cost of your current expenses.

Individual expenses can be budgeted by allocating a certain amount for each family member to spend each week. If someone spends his entire amount before the week is up, reevaluate his expenses and adjust if necessary.

A realistic family budget can help keep spending under control, leaving more money to pay down debts and save for the future. But in order to succeed, close monitoring is crucial.

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