For singles, creating a budget is relatively easy. They tend to have good control over the amount of money coming in, and when tracking expenses, they only need to think about their own expenses. But creating a family budget is a whole new game.
Most families have multiple sources of income. And when there are multiple spenders, it makes things a lot more confusing. This is one of the main reasons why families do not have a formal budget. But having a budget and keeping it can greatly improve a family’s financial prospects.
Making a family budget can be tricky, but it can be done. That’s how.
1. Take an inventory of all recipes. If a particular source of income fluctuates from month to month, use the lowest or average value.
2. Track all expenses for about a month. Keep all your receipts and ask all family members to give you yours every day.
3. Add your monthly expenses. Be sure to include bills, debt payments, groceries, and daily expenses, such as lunch money and transportation costs.
4. Get the family together and discuss ways to cut the budget. Obtaining information from other family members will help you determine which expenses are necessary and which can be reduced or eliminated. Maybe you or your spouse can start lunch for work instead of going out to eat, or maybe your kids can give up extracurricular activities.
5. In addition to individual expenses, discuss how you can reduce your electricity bill, food, and other necessary family expenses. Consider things like hitchhiking or public transportation, buying more general groceries, and adjusting the thermostat.
6. Calculate how much you can save on regular expenses and eliminate completely unnecessary items from the budget. Then, reconfigure it and see where you are.
7. You can keep in mind the surplus if possible to invest in new things more needed in the family than to unimportant things which can be waived off.
8. If you end up with a surplus, allocate a part of it to savings. If you’re in the red, come back and make a new budget until you have more income than expenses.
One of the reasons that family budgets tend to fail is because they are simply not realistic. It’s great to cut costs, but sometimes we tend to go too far. For example, cutting entertainment from the budget altogether may look good on paper, but we all need to have a little fun now and then.
Instead of cutting these things out of your budget entirely, consider looking for ways to reduce the cost. Going back to the entertainment example, you may have gone to dinner and a movie with your family twice a month. But eating and renting a new launch would be much cheaper and they would still spend quality time together.
Individual expenses can also be complicated. This can be done by making a proportionate amount to each family member on weekly basis. If someone spends the full amount before the end of the week, reevaluate your expenses and adjust if necessary.
Creating a family budget can help keep spending under control, leaving more money to pay debts and save for future goals. But to be successful, close monitoring is essential. However, your efforts will be rewarded with less financial stress and more money in the long run.