Family budgets can create harmony or chaos, depending upon how you approach the task. Including each family member in the budgeting process so everyone understands where your money is going and what your financial goals are will go a long way in getting your family on board for cutting costs and increasing savings.
Income
Assessing your income will help you budget your expenses more realistically. Income is not limited to your salary or paycheck. The Texas AgriLife Extension Service advises that you consider income from interest, rentals, gifts, child support, alimony and even yard sales as part of your family income. Basically, any money you receive in any way, shape or form makes your family's income. You can make an exception to money your children earn if they do not directly contribute money to the household.
Nonessential Expenses
You should tally your nonessential expenses because this is often the area of spending where most families can make reductions. Nonessential expenses are often related to entertainment or convenience. They may improve your quality of life, but they are not essential for you to live. This includes expenses such as dining out, theater tickets, cable television, cell phones, salon services, jewelry and vacations. It is important to note that although they are not essential expenses, that doesn't mean they aren't important to you or members of your family. You can brainstorm together to figure out ways to reduce or eliminate these types of expenses while still living a comfortable life.
Necessary Expenses
After your nonessential expenses are accounted for and examined for ways to cut back, it's time to examine your necessary expenses. According to the University of Georgia Cooperative Extension, these include rent or mortgage, car payments, groceries, utilities, fuel and insurances. Although these expenses are necessary, that doesn't mean they are fixed. If money is extremely tight, perhaps you could downgrade to an older car or a smaller apartment. Shop around to different insurance companies for home, health, auto or life insurance to get the best prices for the coverage you need. There are always ways to trim your expenses to put money toward your long-term goals.
Savings
Many families start budgeting when they realize they will have major expenses in their future and need to start saving money now in order to accomplish that goal. Retirement savings is a good idea for anyone who plans to retire some day. Other savings goals may be purchasing a house or car, having children or paying for college. It's wise to have separate accounts for each of these goals to resist the temptation of using saved money for something other than its intended purpose.
System
Once you have established what your income and expenses are and have discussed areas where you can trim expenses, you'll need to set up a system to follow to achieve your budgeting goals. It doesn't have to be complicated or rigid. Some families find that "paying their savings" first and then spending the rest of the money as they see fit works well for them. Others may want to watch expenses more closely and allocate set amounts for each expense category, with any extra left over being put towards savings. Whatever system you decide is right for you, it's always a wise choice to allow each family member to have a discretionary allowance that they can spend---or save---as they see fit. This will keep each person from feeling they are being personally deprived or "punished" by the new family budget.
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