With the economic crash of 2008, more people are concerned about saving money and paying bills. A good financial plan is necessary to make sure you are living within your means and saving enough to meet your financial goals. A family budget is a necessary part of that financial plan. In fact, it is the foundation that financial plan should be built on. A family budget is an easy concept, but it will take several tries to make it work for your individual circumstances.
Things You'll Need
- Ledger or notebook
- Paper for notes
- Filing system
- Copies of bills and bank statements
- Computer with spreadsheet program (optional)
Defining Liabilities and Income
Liabilities are thing that you owe. They are things that take money away from your budget. Gather up all your receipts, bills and bank statements. On a sheet of paper, list all bills and payments that are the same or almost the same every month. This may include things like rent, mortgage, utilities and insurance payments. Do not include credit cards in this list.
List all of your credit cards. At first, list the minimum monthly payment. When you balance your budget, you will alter these values so you can pay them off quicker.
If you have any bills that are paid quarterly, bi-annually or annually, list those next. Be sure to write down when each is due.
Estimate the cost of necessities such as groceries and gas for each month. Bank statements and credit card statements can help with this.
Estimate luxuries such as movie rentals and dining out. Again, your bank statements can help here.
Write down your monthly income. For you salary, include only your net income, or "take-home pay." If you are self-employed, include your estimated tax payments and business expenses, as a separate category, in your liabilities; use you gross income here.
Write down all your savings accounts. This is necessary because if your income does not cover your liabilities for a long enough time, you may have to use your savings to fill the deficit.
Balancing the Budget
In a notebook, ledger or spreadsheet program, make a chart with one column for each month and rows for each of your income and liability entries. Include a payment to yourself for savings. If you give to charities, include that here as well.
Fill in the columns and rows with the values you wrote down as you were collecting the data. It helps to divide the columns into the categories, such as "Necessities," "Credit Cards" or "Net Income," you used when defining your income and liabilities. Remember to include the quarterly, bi-annual and annual payments in the months in which they are due.
Using these values, calculate your total income and your total liability for each month. Subtract the total liability from the total income. A "balanced budget" is one in which total income equals total liability. If you have money left over, apply it to credit card payments or to savings. If you still owe money, go back through that month's entries and determine if anything can be cut. If not, you may need to consider borrowing from your savings.
Repeat this process for each month. It's a good idea to have a budget that is calculated for 12 months out. Review it every month and adjust the entries as necessary.