Tips for setting a family budget
Whether you're strapped for cash or have plenty to spare, a family budget is always a good idea. A budget helps you avoid future financial crisis by helping you live within your means. And guess what? It doesn't have to be an exercise in drudgery! Set your goals and save for big-ticket items like college and retirement. While you're at it, go ahead and sock away for a fabulous family vacation, too.
Define your budget goals
Why create a family budget? Two reasons:
- To make sure you'll have enough to cover your family's monthly expenses
- So you start saving now for future expenses
The key to sticking to any budget is to clearly define your goals up front. Are you trying to save for your kids' college tuition, cleaning up your credit so you can buy your dream home or working toward an early retirement? Discuss your family financial goals with your partner, and use that as the motivation to create a realistic family budget that you can live with.
Evaluate current spending
Before you put pencil to paper (or fingers to spreadsheet, as the case may be), take stock of your current spending patterns. For one month prior to setting your family budget, track how much you're spending not only on the recurring expenses like mortgage, utilities, groceries and car payments, but on the extras as well. It's easy to underestimate how much you spend on things like gifts, eating out, clothes and makeup. Use monthly statements to track your credit card and debit card expenses, and keep a notebook to jot down what you're doing with all those $20 bills you take out from the ATM. You might be surprised at how all those small expenses add up!
Before divvying up your income to expenses, determine how much you would like to save each month. Make sure you allocate that savings into different buckets, which might include these categories:
- Vacation savings
- Emergency savings
- College savings
- Retirement savings
After you've set aside your targeted monthly savings amount, use the remainder to assign targets for your family's expenses. By paying yourself first, you'll set yourself up for financial success.
Use budgeting tools
Websites like Mint and Buxfer help you view all credit card and banking activity in one place and provide tools to create and track budgets. Both of these sites provide bank-level security for your financial information and feature user-friendly designs that simplify the budgeting process. If you prefer to create your own budget, a quick online search will provide you with numerous options for family budget templates that help you define your family's expenses by category and track monthly spending and saving.
Wall Street Journal columnist Jennifer Openshaw says, "A lot of people will base their budget off of their gross income... You'd be smarter to base it on your after-tax income or your net take-home pay each month."
More on family finances
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