Budgets help you find ways to take control of your money, usually with an overriding aim of eliminating debt or achieving a larger financial goal in the future. But the practicalities of implementing a budget are complicated, especially when family members have different expectations and desires about how to spend the family income. One solution to this problem is to involve all family members in building a budget, ensuring that everyone understands the family's long-term goals and supports the overall plan.
Tools
Document your budget so you remember how much money comes in and how much goes out each month. Documenting also makes the budget process transparent to every family member. Use a notepad or simple spreadsheet or contact a financial planner for assistance.
Income
The first place to start your family budget is by defining all sources of income. Include salaries, hourly wages, retirement benefits and income from trusts or investment accounts. Only include the amount of money deposited in your bank account, which is your net income or income after taxes and other deductions. Also, include only income available to support your family and its wider goals. If you have a teenager who baby-sits to make money for clothes, you should exclude his income from your calculations.
Expense Identification
The Australian Government recommends tracking your spending over two or three months to identify where your money goes. Start by listing your regular monthly expenses, such as a mortgage, car payment, insurance payments and utilities. Then include the expenses that vary each month, such as food, personal care, clothing and entertainment. Use your checkbook, credit or debit card statements and keep receipts to identify these expenses.
Define spending categories that are useful, but not burdensome to monitor. For example, you can use food as a broad category, or break your food spending into groceries, eating out and ordering in. Personal care categories could include haircuts, manicures, pedicures and massages.
Expense Management
Once you have identified where your money goes, begin budgeting for the near future by making choices about how to spend your income. For example, your two-month expense tracking might show that you spend $250 dining out each month. If you want to increase the amount you pay toward your mortgage, set a goal to spend only $150 in restaurants the following month, and document this goal in next month's budget. Track the amount you spend eating out and choose to eat at home when you near your $150 limit.
Involve Children
Kiplinger's recommends involving children in the budgeting and spending process to gain their buy-in and prepare them to manage their own money in the future. Show your kids the electric and gas bills, and use the budget spreadsheet to demonstrate how your monthly income is spent each month. Or, give them responsibility for monitoring a budget line, such as entertainment or clothing expenditures, and ask them to let you know when the family is nearing the budget limit for the month.
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