How to Plan a Family Budget
Planning a family budget can seem like an impossibility. It is more important than ever to ensure your families financial security and having a family budget is a key component in that process. A family budget is simply a guideline that shows what income is coming into the home and what expenses are exiting the home. It is a great tool to see where your money is going and how you can trim your budget to create a larger savings, or help make those high interest credit card payments.
Income
The first step to planning a family budget is to look at all the income coming into the home. This includes employment income, dividends, and any interest received. This is the magical number. If your expenses are exceeding this number you are going in the wrong direction.
Main Expenses
Main expenses include necessities such as housing, utilities, groceries, car payments, and medical bills. These are things that you cannot live without. Just because they are a necessity however, does not mean that they cannot be reduced. Taking a hard look at your must haves every month gives you an idea of your expendable income. If this number alone exceeds your income, than there is major problems that need to be addressed, either by downsizing, or gaining additional income.
Savings
Having a savings plan is very important. Have you begun saving for your child's future education needs? Do you have a rainy day fund if something should happen to the primary wage earner in the home? Do you have a backup plan for when the car needs repaired or the washer breaks? If the answer is no it is time to start one. A great place to start is by creating an education fund and placing 2-3% of your income in there each month. A rainy day fund should hold about 5% of your income, and a household savings account another 5%. This totals about 12-13% of your income that should be put into savings each month.
Debt
The debt portion of your family budget includes credit card bills, and other bills that are paid on monthly. Any installment account payments should be listed here. This is important so you know what expenses are going out. If your credit card debt is high, try consolidating some of that debt for a lower payment and interest rate.
Other Expenses
Here is where savings can really happen. This category includes areas like dining out, entertainment, shopping, and other unnecessary expenses. If your budget is tight, try starting here to gain extra room for other areas. You can always find an alternative. For example instead of that hair salon visit twice a month, try only going once a month.
Now that you have all your expenditures and your income, you can see where your families financial status really is. If there is more income than expenses great, otherwise take a look at some areas where you can cut back. If there is additional income left over, consider placing that in savings for future use.