A budget that covers the income and expenses of a family can help to manage rampant family debt and promote savings, according to Veterans Affairs Canada. By developing and sticking to a budget, families can avoid many of the problems associated with money. Allowing each member of the family to contribute to the budget development, parents and children alike can take ownership of its maintenance and reap the benefits.
Time Frame
To get a handle on where to start preparing a budget, expenses and income should be monitored for a period of time. After keeping close track of expenditures, bills and income for one month, you can begin to gauge where spending might be curtailed and savings increased. Once a monthly budget is set according to recurring bills and standard expenses, such as food and entertainment, one-time costs can be added. An effective family budget should cover one year and include money for unexpected expenses.
Features
A family budget should be divided into pertinent categories to best glean a picture of where the money goes. According to Bankrate.com, an effective budget includes categories that include living expenses, such as clothing, prescriptions, food and pet costs. Housing costs that include the mortgage or rent, utilities, cable and telephone are vital. Expenses that contribute to the family income such as work-related transportation, clothing, day care and parking must be included. Personal expenses round out the budget, and include alcohol and tobacco costs, entertainment, books, magazines and charitable contributions.
Potential
In addition to reducing stress and improving family relationships, creating and sticking to a family budget enhances the family's lifestyle. Goals can be set and achieved to provide luxuries and vacations. When preparing a budget, a family should build in a savings plan to reach common goals, according to Bankrate.com. By including family goals that enhance the family lifestyle, family members are more inclined to stick to the budget and contribute to the savings.
Warning
Unexpected costs are certain to appear over the year and can derail a family budget. According to Bankrate.com's financial advisers, families should plan on putting away 10 percent of their income in a fund designed to cover those expenses. Home repairs, medical emergencies and reduced income through layoffs or job loss are a few possibilities the fund can be used for to protect the family budget.
Expert Insight
Managing current debt is an important factor to be considered when creating a family budget. Credit cards and loan payments must be included in the recurring monthly expenses. According to the Federal Trade Commission, families who have lived on credit often find themselves restricted in their options and unable to continue their current lifestyles when overcome with unmanageable debt. Credit counselors and debt management consultants provide assistance to families having trouble building and sticking to a budget designed to reduce debt and build savings.
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