A family budget is essential for most people to keep track of income and expenses, according to Money Alert. It gives you a clear plan for maintaining a lifestyle within your means. If you come up short, you have a better idea of where the money is going--enabling you to make logical adjustments. Money-Zine.com says that most people don't know how to manage their expenses. The goal in having a family budget is financial peace-of-mind.
Income
A family budget starts with the income. Kiplinger recommends including all sources, including jobs that provide earned income, bonuses, investments, freelance work and other sources. Since you'll be working with actual take-home pay, use the net figure after taxes and deductions your employer withholds. Add gift money and other income you typically have during the year.
Essential Expenses
Certain bills must be paid every month. These include your mortgage or rent, property taxes if they're not held in escrow, property insurance, life insurance, auto insurance, health related items, utilities, homeowner association fees, credit card payments, professional fees and car payments. Some of your monthly expenses will vary. Review the past year's expenditures to get an idea of how much you'll need to budget for energy bills, groceries, child care, alimony, child support, clothing allowance, personal care items, automobile repairs, fuel, other transportation expenses, college fund, IRA and other investments.
Variable Expenses
Some of your expenses are optional, so they fall under the variable category. Include items such as recreational allowance, entertainment, dining out, magazine and newspaper subscriptions, charity donations and miscellaneous. If you have a choice between lawn maintenance and mowing your own lawn, include this as a variable expense. Having someone clean your house, for instance, is also a variable expense. Anything you typically spend money on that can be cut should be in this column.
Income Minus Expenditures
After you have all your columns filled in, subtract your total expenses from your total income. Ideally, you should have higher income than expenses. If the income is lower, you'll need to cut by prioritizing your variable expenses. List them in order of preference and start by cutting out the lowest on the list.
Goals
Make another list of your family's financial goals. Include the amount you need to save for retirement, how much you'll need to send your children to college or other advanced education. List big-ticket items you'll need to replace such as cars, furniture, air and heating systems and roof. If you keep a running credit card balance, list a date and payment plan to pay them off so you won't have to worry about debt when you retire. Include anything you've had to cut from the variable expense list that you might want to add back when you can afford it.
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