With the rising cost of living and increasing prices of basic necessities like food, clothing, and healthcare, it’s important to learn how to make a family budget to help you save money. With the number of available resources on the Internet today, learning how to make a family budget has never been easier. Here are some tips to help you get started.
Create a plan together
Before you start making a budget, it’s important to sit down and talk about your financial goals as a family. Then decide together how much money you want or need to allocate toward certain expenses and where you might be able to cut back. Once you’ve created your plan, make sure everyone in your household is on board with it before moving forward. If there are any disagreements or confusion, try to work through them together—and if things get heated, take a break for now and come back when tempers have cooled off.
Set your goals
Without goals, you don’t have anything to aim for, but with too many goals, it’s easy to feel overwhelmed and unproductive. I recommend you set three big financial goals (e.g., pay off credit card debt by end of year) and then break them down into smaller monthly or weekly action steps. It’s important that these are things that are within your control and relatively short-term in duration.
List your expenses in detail
Whether you have a family or not, expenses can be hard to stay on top of. It’s easy for your spending to get out of control, and quickly. To start budgeting effectively, first go through your monthly expenses and list them in detail. In other words, figure out exactly how much money you spend on food each month. Don’t forget about hidden expenses like going out for drinks after work with co-workers! Try using online calculators like Mint and Monarch; they will help take away some of the guesswork involved in figuring out where your money is actually going each month.
Evaluate your income and savings
First, you need to figure out how much money you are bringing in from your job, investments, and other sources of income. Subtract your monthly expenses from that number. If there is a difference between your income and expenses (the latter being higher), then you’ll want to make some adjustments in order to start saving. Write down everything you spend money on and consider where you can cut back. Consider asking family members for help if necessary.
Do the math
It’s a great idea to start by sitting down with a pen and paper (or a spreadsheet) and tallying up your household’s monthly expenses. Get as specific as possible; don’t just write $500 rent. Instead, list all of your rent-related costs: $300 for rent, $40 for electricity, $100 for cable, etc. This exercise will help you understand where your money is going—and how much room you have left in your budget to spend on other things. If you have trouble coming up with an accurate total, consider consulting a financial advisor or accountant who can give you an objective view of where your money is going each month.
Set up an automatic transfer
Setting up an automatic transfer is one of those things that makes you say, why didn’t I do that sooner? Most banks or credit unions allow you to set up recurring transfers. At my bank, once a month, $500 will be transferred from my paycheck directly into a savings account. Yes, it means saving less each pay period (which is not ideal). But every year on December 31st, you can look back and see exactly how much was saved for your family during that year.
Track your progress
Whether you’re trying to save money or earn more, it’s important to stay on top of your progress so you can make informed decisions. Whether that means signing up for a free service like Mint or a paid account like QuickBooks or Monarch, keeping an eye on your numbers is an important aspect of staying organized and informed. Staying informed helps keep our emotions in check—something we all struggle with sometimes but is especially key when it comes to finances.
Revisit regularly
It’s important that you continue to revise your budget. Don’t fall into a trap of making it once and assuming it is perfect, because life doesn’t work like that. Things change; you will forget about money you put aside for something else; certain habits will change and so forth. Don’t worry—it is easy enough to adjust things as they need adjusting. It is also helpful to have someone look over your budget with you at least every month or two.