How to Create an Annual Family Budget
Following a family budget sustains you in good economic times and bad. It encourages you to live within your means and put money away for future needs like college and retirement.
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Instructions
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Track Your Spending
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Start with an online budget calculator or a spreadsheet program such as Excel. If you feel more comfortable with a low-tech option, then pen, paper and a handheld calculator will do the job.
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Obtain a printout from your bank with transactions for the last three months. Do the same for any credit cards you use on a regular basis. Calculate the total amount spent over the three-month period. Divide by three to determine an average of your monthly expenses.
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What is your monthly and yearly income? Are you paid twice a month or every two weeks? Include all sources of income that contribute to your household funds. Now compare your monthly income with your monthly expenses. Is the total amount of money going out more than the money coming in? If so, consider ways to cut spending or generate additional income as you prepare your new budget.
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Create a category for each area of spending. Examples: food, mortgage/rent, car payments, fuel, credit card payments, utilities, clothing, childcare, insurance, cable and internet, medical, entertainment, savings and charitable contributions. Use bank statements to calculate how much you spend each month, on average, in each category.
Allocate Funds
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Take a close look at how much you currently spend in each category and how much you can afford to spend to stay within your budget. Find areas to make cuts where necessary. Can you eat out less frequently? Cut back on clothing costs?
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Make an effort to increase spending in areas such as savings and debt reduction. Even a few extra dollars a month can make a significant difference.
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Map out spending for one year. Allow for unexpected or miscellaneous expenses such as car repairs, school fees and gifts, plus larger expenses like family vacations and holidays.
Stick to the Plan
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Refer to the budget often.
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Track every expense. Sit down with your family regularly to find out what money was spent and where. When expenses change, revise your budget as necessary.
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Put credit cards away. Use them only in emergencies.
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Use small incentives such as stickers or treats to enlist help from younger family members. Encourage them to turn off lights and appliances when not in use; ask for their suggestions on low-cost family activities like game night or a trip to the park. Buy a piggy bank to help them foster their own healthy financial habits.
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Tips & Warnings
Check with your bank for high-interest savings or checking programs. Choose an account with no fees. Some accounts reimburse ATM fees. Others offer savings programs that draw funds automatically from your checking account each month.
Resources
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