How To Set A Family Budget

Paying your monthly bills can be a challenge if you don't have a family budget in place. A budget helps you analyze where your money is going every month and whether or not you're living above your income level. Seeing the numbers on paper or calculating your budget using a software program can give you a goal for reducing expenses and saving money. If you are living without a set family budget, sit down and adopt a budget that fits your lifestyle and helps you financially.

Step 1

Calculate your average monthly income for the past year. Include salaries, alimony, child support, bonuses and any other regular sources of income for you and your partner. If payments such as bonuses are not normally part of your income, do not include them. Avoid including one-time disbursements from retirement income, inheritances and monetary gifts. Write down your average monthly income on a sheet of graph paper or input the figure into a budgeting software program.

Step 2

Use your debit, credit card and bank statements to calculate your monthly expenses. Divide your expenses into variable and fixed expenses. Car, rent and loan payments are common fixed expenses. Average other fixed expenses such as electric, gas and phone bills to determine the monthly costs. List your variable expenses such as birthday gifts, membership fees, tuition, clothing purchases and restaurant meals. Remember to include co-payments for medical visits, dry cleaning bills and credit card payments.

Step 3

Add your monthly fixed and variable expenses together and compare the result to your average monthly income. If your income is less than your expenses, do not panic, advises Dave Ramsey in his book "The Total Money Makeover." Sit down with other income producers in your family and go over your budget line by line. Cut every unnecessary expense possible. Ramsey recommends cancelling cable, reducing cell phone plans and selling expensive cars.

Step 4

Look at your budget again and recalculate your expense versus income figures. Put a line for savings on your budget sheet. Budgeting savings into your family budget may seem impossible, but a savings account can help you pay for unexpected expenses such as car and house repairs without relying on credit cards. Bankrate recommends asking your bank to transfer a set amount each month from your checking account to your savings. Use any additional income such as a second job or having a garage sale to build up your savings account.

Step 5

Involve every family member who is able to understand the new budget guidelines. Explain that budgeting will help the family avoid paying excessive interest on credit cards, save money for the future and feel less burdened by financial pressure. Ask for input and suggestions.

Tips and Warnings

Save money on groceries by using coupons and shopping the sales. Remember to have a meal before grocery shopping and buy only what's on your grocery list to reduce your impulse buying Reduce your credit card interest rates until you pay them off by switching high-interest balances to lower interest rate cards. Meet with a licensed, reputable debt counselor if you are having trouble paying your bills. Make your own coffee rather than buying it at an expensive coffee shop. Set a budget for holiday spending.
Avoid debt consolidation loan companies. If you need a consolidation loan, ask your bank.