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How to create a family budget

Basics of household budget

The first step in living a disciplined and financially healthy life is to create family budget. It can’t just be you or your spouse/partner; but the entire family, including effectively managing little Johnny or Suzie’s monthly “toy” budget. A family budget is a great tool to assist your family in meeting both short- and long-term goals, whether it’s paying down debt, being able to afford a child’s private education, planning for retirement or even a vacation home.

How to Create a Family Budget:

Gather All Your Financial Statements

This includes bank statements, investment accounts, recent utility bills and any other sources of information related to income or expenses. The objective is to gain a better understanding your family’s cash flows.

Record All of Your Income

If your income comes in the form of a regular paycheck, in which taxes are automatically deducted, it is fine to use the net amount or take-home pay amount. If you are self-employed or have other sources of income (i.e., rental property, etc.), please record those sources as well.

Make a List of Monthly Expenses

Now make a list of all expected expenses you will incur each month. This includes fixed and variable expenses, which can be categorized as discretionary and non-discretionary expenses. This could include a mortgage payment, car payment, utilities, insurance, school loans, groceries, dining out, retirement or college savings and essentially anything that you spend money on.

Compare Income and Expenses

After compiling a list of your sources of income and monthly expenses, it’s now time to compare your results. If you have more income than expenses, then you’re off to a good start. Now you can focus your excess to areas of your budget such as an emergency fund, retirement savings, college savings or a vacation home. If you are spending more than you bring home, then you may be using credit to cover the “shortfall” and will need to make some changes.

Target Discretionary Expenses and Start Cutting Them Down

If you have accurately identified and listed all your expenses the ultimate goal would be to have your income and expense columns to be equal, which means all of your income is accounted for and directed for a specific expense.

If you’re spending more than you’re bringing in, then you need to start with discretionary expenses to find areas to cut. With discretionary expenses, it should be easy to trim some money in a few areas to bring your expenses closer to your income.

Start Prioritizing Your Debts

If you have debts (i.e., credit cards), your budget should already include the minimum payments that you have to make each month; however, you need to find money to pay down those debts – start with the account with the highest interest rate. Pay that debt off, and then go to the next most costly account.

Use this budget template to create your own family budget.  Be sure to check out Part 2 of How to create a family budget

Budget – Template


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  1. I totally agree that keeping a budget can greatly improve your family finances. When you start to meticulously record daily expenses, you’ll definitely discover some categories with wasteful spending. We all have a habit of spending money on little things that shouldn’t make such a big difference when accounted for separately, but which in fact can add up to significant amounts during a month.

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