How to Create an Easy Family Budget

Vacations are part of the family budget

Creating a family budget is relatively straightforward procedure that involves balancing monthly expenses with monthly income. The goal is to learn to live within your means so that at the end of the month bills are paid, part of the income is saved, and you are able to treat yourself and your family to vacation and entertainment.The budget helps to identify and track expenditures and to limit and control spending. In addition, long term goals are also an essential element in making a budget.

Things You'll Need

• Notebook
• Calculator

Instructions

1. Write down monthly income and month expenditures in a notebook. The first step is to organize the information necessary for planning a budget. Open the notebook and use the left page to record income and the right page to record expenditures. Include all expenditures and purchases no matter how small they are.

2. Categorize the expenditures. Typical categories are household expenses, transportation, living expenses, family and personal health care, and family recreation and entertainment. Make another distinction between expenses that are paid every month and expenses that are more random. The former category includes the mortgage, car payment, insurance payment and so forth.

3. Add up the total monthly income. Don't include random sources of income such as garage sales but only income that is consistent every month.

4. Add the expenses and deduct the expenses from the total income. This determines the amount of discretionary income at your disposal, If the the total expenditures exceeds the total income then you will have to find ways to cut and limit expenses.

5. Set monthly limits for how much you will spend on discretionary items such as eating out or entertainment. Keep track of these expenses, and once you reach your limit, stop spending on these items for the month.

6. Clarify your long term and short term goals. One of the primary purposes of a family budget is to achieve long term goals such as saving for your first house and saving for retirement. A budget allows you to track monthly expenditures and to limit unnecessary spending. Make a list of priorities that includes long term goals, such as buying a home, and short term goals, such as a family trip or vacation.

7. Diligently follow the budget each month. Unexpected expenses will occur from time to time and it is helpful to have a category for the unexpected as part of the budget. Nevertheless, it will be tempting to stray from the budget for various reasons. The important thing is to stay diligent and keep your long term and short term goals in mind.

Tips & Warnings

• If you enter your income and spending data into a computer spreadsheet program, it can be a lot easier to keep track and generate monthly totals.

References

• Better Budgeting: Budget Building 101
• Say Planning: Budget Planning and Management