Are you ready to get started on a family budget? Are you overwhelmed? It can seem complicated at first – how do you categorize everything? What about expenses that fluctuate or aren’t monthly? Here are some practical tips to plan a family budget that everyone can stick to.
Before you get started on a family budget, you need to make sure you have the right tools. Having printables is a great way to start to plan a family budget. Having a hard copy to refer to is a great way to hold yourself and your family accountable.
And simple things like a calculator, pencils with erasers, and access to your bank accounts and bills. You can’t know where you’re going until you see where you’ve been(no matter how scary it may be).
I admit, the thought of being on a budget makes me cringe. But with both my kids in college, it is imperative that our family creates and sticks to a budget.
And lastly, you need to get the entire family on board with the idea, or all the planning in the world isn’t going to do any good!
Be Realistic With Your Family Budget
Remember that your budget is a tool, not a dream machine. Goals are important, but a family budget should first focus on the numbers you’re dealing with. That’s the basic first step. Once you have a grasp on that, you can begin a bit more idealizing, such as saving for vacations, desired items, etc.
And while vacations and desired items are wonderful, you need to be realistic. It’s not worth borrowing beyond your means just to say you had the most wonderful vacation ever(if you can pay for your vacation with cash or ahead of time, then feel free to splurge). Stay-cations can be just as wonderful, as are local day-trips.
Use Your Net Income As A Starting Point For Creating Your Budget
First, figure out your net income for each month. This means your income minus taxes, insurance, 401K deductions, and so forth. If you are self-employed, subtract estimated taxes, insurance costs, retirement account savings, etc. At this point, you just need numbers.
A lot of times, your income is less that what you think. Be mindful of that. Keeping track of it will prevent any unwanted surprises.
Create General Categories When You Plan A Family Budget
Next, figure out your monthly expenses. If they vary, figure out an average by looking at the last three to six months’ worth of expenses. For instance, if your electric bill was $150 last month, $140 the month before, and $175 the month before that, then you can estimate a monthly expense of around $155 for electricity. Alternatively, you could take the highest amount, $175, and go with that.
It’s a good idea to keep your categories as general as possible while still preserving clarity. Otherwise, you might get confused or overwhelmed by all the “hair splitting.” For example, instead of having “food, paper products, drug items, etc.” as categories, you can lump all those expenses under “groceries.” Items like “pet supplies” can be their own category, but you might want to include vet bills in that category. Here are some suggestions for categories:
- Charitable giving
- Payment off debt
- Home (mortgage, rent, property tax, insurance, repairs, etc.)
- Health Care
- Birthday and Christmas gifts
- Cushion (this is money set aside to offset surprises, mistakes, or unexpected expenditures)
- Personal (coffee, eating out, hair appointments, etc.)
Stop And Review The First Steps
At this point, stop and take a look at what you’ve got so far. Are your expenses greater than your income? It’s time to cut back significantly, or find another source of income (or both). If both adults work, maybe it’s time to look to see if it is worth it. The amount you are spending on gas, clothes, lunches, car wear & tear, etc., might be greater than the amount of money you are bringing in.
Take Note Of Your Actual Expenses
Now that you have a plan of what your budget should be, it is time to look at your actual expenses. You may want to step back for a day or two to get everything together. Have an organized financial center in your home will make that easier.
So far, you have two columns – income and estimated expenses. Now you need to add another column: actual expenses. You can use the previous month’s numbers to get you started. Keep track of the real numbers each week over the next month and see how much/if they differ. This part can be really eye-opening.
Discuss Your Family Budget With The Entire Family
Now comes the most difficult part of the planning a family budget: discussing it with your family members. More often than not, adults don’t want their kids to know about “the numbers”. Unfortunately, in this day and age, it is even more important to inform and teach our younger generation about money.
Set a date and time for everyone to get together to talk. Order a pizza(remember your food budget category?) and sit everyone down. Have your papers and proposed budget to show everyone. I am sure you will agree that there may be a lot of resistance. There may be denial or anger, but it is very important that everyone knows how things stand.
Use this time to hear what other family members think can be added, deleted, or changed.Your kids may have a fresh perspective on things you have that may no longer be important(cable TV was one for us). Bounce ideas off one another. Set goals for vacations and fun. Whatever you decide, do it together.
Schedule A Date To Evaluate & Update The Family Budget
Grab your calendar and mark a date for everyone to meet and go over the family budget. See what is not working or is definitely working and make any necessary changes. Revisit and rework your goals if necessary. The key thing is to do what is best for your family so you can enjoy life without living beyond your means.
Resources To Plan A Family Budget
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- Clever Fox Cash Envelopes for Budget System
- The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
- Easy Accounting Ledger