How to Set Up a Family Budget

By eHow Personal Finance Editor

Rate: (27 Ratings)

A budget allows you to control your family's spending so that you have enough money to pay your bills while also saving for vacations, retirement and your children's education.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

Step1
Get out three months of pay stubs and determine your average monthly income.
Step2
Gather three months of bills, add them up and divide by three to calculate your monthly fixed expenses such as rent or mortgage, utilities and phone, car payment, insurance and student loan payments.
Step3
Add together three months of other monthly expenses, including groceries, clothing, credit card expenses, medical bills and cash outlays. Divide by three and add the result to your monthly expense total.
Step4
Evaluate your expenses; look for opportunities to economize, and develop a plan to cut back spending in specific areas.
Step5
Develop a monthly budget and stick to it.
Step6
Set up a savings plan such as a passbook account, certificate of deposit (CD) or individual retirement account (IRA), and begin making regular deposits.
Step7
Track your income and expenses monthly to evaluate how the plan is working, then fine-tune to produce the desired results. Use personal finance software to gain an accurate overview of your spending and locate problematic habits.

Tips & Warnings

  • Commissions or other variable income may have to be averaged over 6 to 12 months.
  • Divide annual payments such as taxes or life insurance by 12 and add them to your monthly expenses.
  • Utility companies often average annual bills into 12 monthly payments so that customers aren't faced with higher costs during the winter months. If not, they may be able to provide a projected monthly bill.
  • Accounting for cash out-of-pocket expenses is difficult; try using ATM receipts.
  • A personal financial software program can make organizing your expenses easier.
  • Be sure to account for all cash expenses. Try setting aside time at the end of each day to record any cash expenses.

Comments

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question said

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on 1/2/2007 I have recently had a chance of using a Personal Finance Software package by Australian business Parcus Group - Personal Finance Associate.
The product is very good. For the AU$29 it costs, you get budgeting, financial planning templates as well as advanced features that typically cost loads more as separate software packages such as investment real estate calculations (mainly based on rental cash-flow analysis) as well as some value based shares valuations (based on Warren Buffet's stock valuation methodology)
Their website is www.parcusgroup.com
For anyone interested in their own wealth creation this product is definitely worth looking at.

Anonymous

Anonymous said

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on 11/22/2005 A software product like Quicken is great for organizing all financial data, not just budgets. I have used it for years and depend on the reports it produces to determine what my yearly expenses will be. It is not for everyone, but anyone who has basic financial skills should be able yo use it.

Anonymous

Anonymous said

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on 11/22/2005 Everyone likes to buy their toys, but the overall financial security of the household needs to be considered first. I'm not against toys; just save up the money first to buy them versus putting non-essential day to day expenses on credit. An example of a toy in my relationship was the spouses need to always have a big expensive truck in the driveway. I wasn't against the truck, I was against the debt to purchase the truck when there was no money in the savings or money built up for college tuition. Be considerate of the overall family financial situation and provide financial security for your family.

Anonymous

Anonymous said

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on 11/22/2005 Figure out a budget based on a savings account/checking account split. Savings builds up for things like real estate taxes, vacations, and insurance. Checking is monthly (e.g. phone, groceries, etc.). Split your monthly income into the savings and checking accounts according to the budget. Savings amounts are strictly budgeted. The checking account is controlled by watching the balance until the next payday.

Anonymous

Anonymous said

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on 11/22/2005 In a second checking account, deposit a sum that covers your monthly expenses. Have all of your bills automatically withdrawn. This account acts as a holding cell for household obligations - the primary account is for day-to-day operations. Works for me!

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eHow Article:  How to Set Up a Family Budget

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