The key to having a budget that works is to have a goal, according to financial writer Laura T. Coffey in an article for MSN.com. Whether you're saving for a home or are trying to pay off debt, knowing your money is going somewhere will make it easier to give up superfluous expenses. Reducing your expenses can start with the smallest of steps. For example, use store coupons, buy generic products instead of brand name and eat at home rather than at restaurants.
Step 1
Hold a family meeting. Teenagers should be part of the planning stage, while younger kids should at least be notified of the changes to come. Explain the situation, and ask for suggestions on how money can be saved and what can be cut. Involving the kids can make planning and budgeting less stressful later on, when the changes have to be implemented. Also, kids will be more likely to get on board if they're part of the plan.
Step 2
Make a list of all the common family expenses, such as electricity and water, rent or mortgage, transportation or gas, Internet and cell phones. Round up the last few months' worth of bills so that you can get an average. Decide how much you want to reduce each bill, and then brainstorm ideas on how to do it. For example, according to the U.S. Energy Information Administration, the average electricity bill for an American household varies between $63.24 in New Mexico and $203.94 in Hawaii as of March 2010. Pacific, Mountain and Middle Atlantic states have the lowest bills, while South Atlantic and West South Central states have the highest. If your bills are above the national average, you should try reducing the amount you spend on electricity.
Step 3
Make a second list with optional expenses. This list should include family outings, clothes, sports or other after-school activities, and birthday and holiday presents. Optional expenses are where your budget could be adjusted the most. Talk to your kids to see which activities they love the most and want to keep, and eliminate the rest.
Step 4
Set a basic entertainment budget, and then reduce your expenses to fit into that budget. Look for things you can do together as a family that don't require much, if any, money. Local public libraries and parks, community centers and other free sources of entertainment can help you significantly reduce your budget.
Tips and Warnings
- You can keep a budget using a simple Excel spreadsheet or a computer program like Quicken.
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