A family budget keeps spending on track, ensuring enough money is allocated to bills and other expenses. A budget prevents overspending on entertainment and other items, but that doesn't mean you have to give up the extras completely. Budgeting can help you focus on paying down debt or save up for a large expense, such as a new home or a family vacation. Gathering all of your billing statements before you begin your budget makes the process easier.
Step 1
Save all receipts, ATM slips and billing statements for a month to track your spending. This helps you make an accurate budget and determine where you are spending excessively. Another option is to use your banking and credit card statements to determine how your money was spent.
Step 2
Add your total income from all sources. Include regular paychecks, commissions and other regular sources of income after taxes.
Step 3
Write a list of all monthly expenses, giving each bill its own line. Write the monthly due on the same line. Include fixed expenses, such as the mortgage, car payment and loans, as well as average amounts for fluctuating expenses, such as utilities.
Step 4
Calculate a monthly average for discretionary spending. Consider things, such as entertainment, travel, car maintenance, gifts, diapers, clothing and other expenses associated with your children. Refer to the receipts or bank statements to reach the estimates.
Step 5
Subtract your total expenses from your total income to determine how much extra money you have each month. Adjust your discretionary spending categories as necessary to keep your expenses lower than your income.
Step 6
Assign the surplus of funds to a savings account, paying down debt or an account for a larger financial goal. Budgeting in savings helps you create an emergency fund for unexpected expenses that inevitably pop up.
Step 7
Discuss the budget with the kids in terms they can understand based on their age. Talking about the budget teaches kids financial responsibility and helps them understand why you cannot buy them everything they want.
Step 8
Withdraw cash from your bank account for the extra spending, such as entertainment or dining at restaurants. Restrict the family to only that amount for the month. Once the cash is gone, there is no more entertainment for the month that costs money, which prevents overspending.
Step 9
Compare your budget calculations with your actual expenses each month to ensure that you are sticking with the budget. Talk with your spouse about any departure from the budget, working together to find a solution for staying on track.
Tips and Warnings
- A spreadsheet works well for tracking your budget because it allows for neat columns and rows for all of your expenses. It also adds columns for you, making the math simple. Add a cushion into the budget in case you spend excessively.
- "Smart Money" warns against labeling one person as the spender that always blows the budget.
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