Running a household is challenging. There’s taking the kids to daycare, preparing dinners, and planning activities for the weekend that must be juggled. At the center of it all is money. Budgeting for family will enable you to pay down debt, lower costs, and save money.
These financial benefits are reasons to start family budgeting. Need a place to start? Learn how to make a family budget by reading this guide.
Budget Planning Process
A budget allows you to track your family’s income and expenses. One of the best budgeting tips to start the budget planning process is to go back through your last few months of bank statements and other paperwork.
Understanding your habitable coming and going of money will help create a realistic budget. It will also help you with income management if you have several unsteady income sources for side gigs. Review all your expenses to see where there might be opportunities to cut expenses.
You might even be surprised by how much your family is spending in specific categories. This method is often the best budget planner because it brings these expenses to light.
Effective Family Budgeting
To be successful with your budgeting strategies, you should have a goal in mind of what you want to accomplish. Examples include creating emergency savings, paying off loans, retirement savings, and saving for a family vacation. Among the budgeting tips that are most important when making these goals is ensuring that they are specific, realistic, and time-bound.
For example, let’s say your goal is to build a $1,000 emergency savings fund. With income management and current expenses, you can put $200 a month toward this goal. It will take you five months to achieve this goal. This detailed level is necessary to keep you motivated, yet challenging enough to push you towards the finish line.
How to Make a Family Budget
When budgeting for family, many types of budgets are available. The right family budgeting type is the one that works best for you. Use the kind of budgeting that your family can stick to. Here are a few types of budgeting strategies on how to make a family budget.
Cash Envelope System
Families don’t tend to overspend on mortgages, house payments, and other fixed expenses. It’s the variable expenses like shopping for clothes, groceries, and eating out that are not as in control. The cash envelope system uses the psychology of using the visual cue of cash to help people not overspend in these categories.
To use the cash envelope system, divide a set amount that can be used for each spending category, such as dining for the week or interval you choose. You can spend as much as in the envelope, but once you run out, there’s no more until the next week.
This system uses the following allocation of your take-home pay:
- 50 percent for fixed expenses
- 20 percent for financial goals
- 30 percent for variable expenses
This system is the best budget planner for making it easy to identify areas where you might be overspending. For example, if you spend 40 percent of your income on food, you need to push back your spending on eating out.
The key idea of this budgeting system is to use every single dollar of income before spending it. Let’s say you take home a $3,000 paycheck every two weeks. You will “spend” the entire amount as soon as you are paid. Your financial goals and fixed expenses come first. Your remaining income is all assigned to variable expenses until you have nothing left. It’s best to write down this budget to use it effectively.
Prepare a Family Budget for a Month
Financial situations can vary from month to month. To manage these variances, prepare a family budget for a month in advance. Don’t go beyond that timeframe even if you think you’ve accounted for birthdays, weddings, holidays, etc. Preparing the budget for the month ahead will provide flexibility and control, which are keys to a budget’s effectiveness.