How to Make a Family Budget That Works for Everyone
Having a budget is important. No matter how much you earn, budgeting keeps you on track, helps you avoid overspending, and makes it easier for you to achieve your financial goals. Family budgets are especially important since household expenses add up quickly and it’s easy to overspend if you’re not following a plan. When you create a family budget, you can structure your plan so that all the family’s monthly expenses are covered while also saving to achieve individual and family goals.
A lot of people get stressed out when it comes to budgeting. That’s natural. Money can be stressful, especially if you worry about running out of funds before you run out of expenses. However, creating a budget and following a financial plan will actually reduce your stress. Once you have a budget and you get used to sticking to it, money management becomes easier and you’ll find it less stressful to afford all your monthly expenses.
Here are some tips for creating a family budget.
Determine What Tools You’ll be Using
Different people feel comfortable with different tools. Some people love to budget using apps on their phone, others would rather create spreadsheets on their computer, and some prefer using pen and paper. There is no right or wrong option, but it’s important to choose what you’re comfortable with. If you decide to use a method that you find difficult or annoying, you’ll be a lot less likely to budget effectively.
Since you’re making a family budget, make sure to choose a method that everyone in the family is comfortable with using.
Get the Whole Family Involved
Having the whole family involved in your budget is important. Since this financial plan will affect everyone in your household, your whole family should all know the details, and they should all provide input into the process. Even younger children can take part in budgeting. It’s a good way for them to learn about money, spending, and saving responsibly. Think about their age and their level of understanding, then have them take part in the process in a way that they can understand.
List your Income
The first step in the budgeting process is to list your family income from all sources. Write down how much each person in the family earns and be sure to only include regular income that you can count on. Avoid including income sources like tips or bonuses because these may not be the same every month.
If any family members do contract or freelance work, and therefore get paid irregularly, you’ll need to estimate their average income and know that these numbers could change.
List your Fixed Expenses
Fixed expenses are things that you need to pay for on a regular basis and that don’t change much. This includes items like your mortgage or rent payments, your monthly car payment, your property tax bill, and other similar expenses.
List your Variable Expenses
Variable expenses are basically everything you spend money on that isn’t a fixed expense. This includes groceries, transportation, clothing, entertainment, etc. These are expenses that you have some control over. To figure out how much you tend to spend in these areas, look at your previous bank and credit card statements.
You’ll also want to make sure you include irregular expenses, such as birthday gifts and holiday expenses, in your budget. These are things you don’t necessarily pay for every month, but they’re expenses that you need to prepare for. Break these down into monthly amounts and make sure you put aside money each month to afford these costs.
Determine Your Goals
Every family will have different goals. Some goals will concern the entire family (such as saving for a family vacation or paying down debt) while others will be individual. Come up with a list of goals as a family and determine how much you’ll need to save each month to achieve these goals. Prioritize your goals since you may not be able to save for all of them at once.
Make a Plan
Once you know how much you earn, how much you spend, and how much you want to save each month, it’s time to come up with a plan. This means you’ll need to create a strategy that will see your family spend less each month than you earn.
If you find you can’t afford all your expenses and save for your goals with the amount of income you earn, you’ll need to make some adjustments. For instance, you may decide to spend less money on entertainment each month so you can achieve your goal of paying down your credit card debt.
Track Your Spending
It’s important to track your spending. If you don’t keep track of how much you spend, it’s easier to spend more than you should. Each family member who spends money should keep track of every purchase they make. This will keep you from overspending and help you stick to your budget.