Creating a Family Budget – And Sticking to It

Good financial health helps lower stress levels so it’s a key component of your overall health and wellbeing. And while saving money in this crazy economy may seem like a daunting task, creating a budget that fits your family makes it much easier. Use these tips to get your household spending in order and start the New Year on the right financial foot.

Budget Basics
Set a Goal. Are you trying to rein in spending to achieve general savings or are you saving for something specific? And how much (for either option) do you want to save each month? Having a goal is a powerful motivator. Write it down and discuss it often as a family to keep everyone committed.

Figure Up Your Income. Knowing the exact amount of money you bring home each month (after taxes) is crucial to creating a budget.

Know What You Spend. You can’t make adjustments until you know what you are currently spending and where.

Start with Fixed Expenses. Make a list of the things you must pay for every month: your rent, mortgage, utility bills, car payments, etc. For fluctuating bills or expenses (like groceries or gas), use the highest they’ve ever been as your benchmark. When they are lower, you’ve got a little extra to save or apply to another budget item.

Examine Your Non-Essential Spending. Divide your discretionary spending into categories: travel, dining out, entertainment, clothes, etc. Don’t just guess. Use credit card statements or your check register from the past three months to arrive at an average amount spent. Use that number to determine a realistic monthly allowance for each category. And don’t forget the small stuff that you pay cash for: those lattes from your favorite coffee place, the pack of gum at the gas station. It all adds up!

Include an Emergency Fund. Add a budget category for unexpected expenses. When and if there are no surprises, you’ll have bonus savings that month.

Set Your Limit. Now that you have your income, your goal and know where your money is going, set the total amount you can spend each month to stay within your income and hit your target savings. Work from that to determine how much you can allocate to each discretionary spending category and stay within your budget. You’ll have to prioritize, and there will be sacrifices, but every family is different. You can decide together what you can, and can’t, live without.

Track It. Once you’ve got a budget in place, use a spreadsheet or one of the many budget apps available to record every penny spent and make sure you’re staying within your limits. Revisit the budget at the end of each month to see if it needs tweaking. Over time, your family’s needs might change; your budget needs to change with them.

Stick With It
Stay Simple. Don’t set unrealistic goals or make your tracking process too complicated. If it’s hard or time-consuming to do, you’re more likely to abandon it.

Family Matters. Include every family member in the budgeting process from the beginning. It is a great way to teach your kids about money and fiscal responsibility, and you can all hold each other accountable. Plus, when the whole family is working toward a shared goal, you’ll all be more disciplined.

Celebrate Success. For every month you stick to your budget, take a small portion of your savings and put it into a “fun” fund. Every six months, use that money to do or buy something everyone will enjoy.