The word budget strikes fear into the heart of many members of the family, especially parents, but when it comes to managing your money correctly and making every penny count, a budget is essential. A written budget helps you know where every dollar is going and how to most effectively pay your bills and debt.
Step 1
Add up the total income your family receives regularly each month, including paychecks, bonuses and side income such as investments. Write the number at the top of your sheet of paper and label it "income."
Step 2
Average the last 6 months of income if your primary source of income fluctuates, such as with a commission sales job or seasonal work. Use this average as your income figure.
Step 3
Make a list of all the bills you pay during a typical month, such as mortgage or rent, car payments, personal loans, credit cards, utilities, insurance and others. Next to each item, put the dollar amount of each bill.
Step 4
Make another list of all the expenses you incur during the month, such as groceries, clothing, entertainment, medical expenses, etc. Place a dollar figure next to each category. If you don't know an exact figure, go back through past receipts and come up with a general number that you're comfortable with. For example, larger families will spend more on food than smaller families.
Step 5
Add up all your expenses and bills and subtract the number from your monthly income. If the number is negative, you'll need to go through and adjust your expenses to make up for the difference. If the number is positive, decide each month what you will do with the extra money, such as putting it into savings, paying off a credit card or paying for medical bills.
Tips and Warnings
- Adjust your budget each month based on the last month's results. For example, if you spent way less on groceries than you had budgeted last month, bring your grocery budget down the next month and use that money elsewhere.
Things You'll Need
- List of bills
- Paper
- Pen or pencil
- Paycheck stubs
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