Balancing the Family Budget


Creating a family budget is a great way to get organized and on track financially, but only if it’s done right. An effective family budget is about planning ahead where every dollar of your income will go that month not looking back and trying to figure out what happened. This is called zero-based budgeting. Every dollar of your income goes somewhere on purpose. Some of that can be savings or investments, but you decide ahead of time where every dollar is going to go.

For your family budget to work, everybody has to be on board. That means if you’re married, both you and your spouse must be committed to your budget plan. If you’re not both determined to make it work, it won’t.

The first step in creating your budget is to determine your income. Look at your monthly income from all sources. Some people have a consistent, regular income. Others, like those whose pay is based on commission or occasional bonuses, may have fluctuations in their monthly income. Build your budget around the income level you can count on.

Have an emergency fund. When building your budget, you’re trying to account for every foreseeable expense, but not everything is foreseeable. Your emergency fund should provide you easy access to your money for these unexpected expenses so you won’t need to resort to credit cards or other borrowed money.

You can’t spend more than you make. Budgeting is all about defining limits and sticking to them. For your budget to work, you need to put together a plan for spending every dollar of your monthly income but no more. To get started on this process, you’ll probably want to go back and track your expenses for a few months. Try to determine exactly where all your money went. When you begin developing your monthly budget, you’ll want to be sure you’ve included everything. This means recurring expenses like mortgage or rent payments, utilities, car payments, etc. as well as irregular or infrequent payments like quarterly insurance premiums or annual property tax payments. It’s easy to forget the bills that don’t show up every month, but you need to plan for them, too. Not planning for them too often results in having to use credit cards or borrow money to cover them.

Avoid debt with good planning. Plan ahead for expenses such as buying gifts (including Christmas) or going on vacations. These are neither surprises nor emergencies. Also, build money into your budget to plan for items like car repairs or replacing a car. You never know when these things will come up, but you know they eventually will, so be ready when they do.

Leave room for some fun. Plan for some “fun” in your budget by including funds for items like entertainment or vacations. Just be sure to keep these items in proportion with your overall budget needs.

Whenever possible, pay with cash. Card swiping has become of way of life in our society whether we’re swiping credit or debit cards. The problem with this is that even if you’re swiping a debit card, it doesn’t feel like you’re spending money, so you tend to spend more. Many families find that a cash envelope systems helps them spend less. The envelope system works well for budget items like food, gasoline, clothing and entertainment expenses. It is much harder psychologically to part with cash than to swipe a card, and when the cash you’ve allocated to a certain category is gone, you’re done spending money on that item for the month.

Many families today are dealing with tight budgets due to unemployment, reduced pay or hours or just having too much debt. There’s just not enough income to cover expenses. If you and your family are in this situation, you’ll need to prioritize. Take care of the basics first. Make sure you pay the mortgage or rent, utilities, food and transportation (if it means getting to work or not). After that, pay what you can and either try to work out arrangements or just let some of your other expenses go until you can increase your income.

Creating a budget plan that works requires planning and discipline, and it may take you a few months to get the hang of it. When it clicks, though, it can feel like a tremendous weight has been lifted from your shoulders. Many families, in fact, talk about feeling as if they have gotten a raise knowing that the money is there for every expense that comes their way.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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