How to Set Up a Family Budget

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:

• Calculators
• File Cabinets
• File Folders
• Personal Financial Software

1. Get out three months of pay stubs and determine your average monthly income.
2. 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.
3. 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.
4. Evaluate your expenses; look for opportunities to economize, and develop a plan to cut back spending in specific areas.
5. Develop a monthly budget and stick to it.
6. Set up a savings plan such as a passbook account, certificate of deposit (CD) or individual retirement account (IRA), and begin making regular deposits.
7. 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.