Creating a family budget is a great way to track and manage income and spending, set attainable monetary goals, and, most importantly, keep everyone in the house on the same financial page. There are many different ways to create a family budget, but the following pointers provide some basic steps for a simple and straightforward start.
Income and Expense Inventory
The first step is to record all types of stable income. This includes everything from salary to child support. Although unnecessary for the most part, listing sources of income that are unstable or spotty is a matter of choice. To keep track of the incomes of multiple family members, create separate subsections within the income inventory.
The next step is to record all expenses, dividing this category into “fixed expenses” and “variable expenses.” Fixed expenses are those that occur regularly, such as mortgage or rent, child support, alimony, and taxes. Variable expenses include things such as groceries and electricity. Receipts and bank statements are helpful to estimate monthly costs and account for all spending.
This inventory can be recorded on a lined sheet of paper or a digital spreadsheet. A digital inventory may be easier, especially for managing multiple family members, but plain paper can work just as well.
Calculating Net Income
Simply put, net income is what remains after the expenses are covered. This figure is calculated by subtracting monthly expenses (including taxes) from monthly income. Ideally, this number should be positive. A negative number indicates debt. Regardless of the value, however, it is essential to write this number down in order to make necessary improvements or changes to the budget.
If the net income figure is negative, some expenses may need to be adjusted. The easiest to modify are the variable expenses, which can be decreased simply by walking more to spend less on gas, using coupons and gift cards before they expire, or ordering water in place of a drink at restaurants.
Even after the budget has been created, it is necessary to continue tracking spending. This will ensure that the predicted costs are accurate and that the budget is being followed. The longer you can track your spending, the more precise your budget will be.