Budgeting 101: How to Create a Simple Family Budget
Even if you have a good job and you are able to cover your family’s expenses each month, you probably feel like you could stand to have a little bit more. While you may not be able to control how much you and your spouse earn each month, you can control how much you spend. Creating and following a family budget can help to control spending and it can save you and your family a lot of money. Keep reading to learn more about making a family budget.
Choosing Your Spending Categories
Before you can sit down and decide how much you will be setting aside for certain expenses, you need to take a look at your family’s finances. If you don’t already have them, take a few weeks to collect your family’s receipts for every penny you spend and keep track of these expenses. After a month, record all of your family’s expenses for the month in a spreadsheet and divide them into categories to see how much you typically spend in each one. The most important categories to track with your budget include the following:
- Home (including mortgage, utilities, maintenance, and cleaning supplies)
- Transportation (including car payments, gas, maintenance, public transportation)
- Food (including grocery costs)
- Entertainment (including eating out, movies, and other activities)
- Unexpected Costs (all other expenses that are not categorized or don’t occur monthly)
- Debts (including student loan payments, credit card debt, etc.)
Once you have an itemized list of your spending for each of these categories you can really buckle down and take a closer look to decide if there are places where you can reduce your spending to boost your savings.
How Much Should You Be Spending?
There are a number of different ways you can organize your budget, so choose the method that makes the most sense to you. One of the most popular ways to break up your budget is to use the 50/20/30 method. Using this method, you would set aside 50% of your monthly paycheck for fixed costs like mortgage, car payments, and utilities.
Fixed costs simply include the expenses you have every month which do not vary much. Don’t forget to include things like gym memberships, magazine subscriptions, and your Netflix account! After allocating 50% of your budget to fixed costs, plan to spend about 20% on payments that will help to secure your family’s financial future.
This includes things like paying down your student loan or credit card debt, contributing to a retirement account, or building up an emergency savings fund. The last 30% of your monthly income should be devoted to flexible spending categories – things like groceries, entertainment, eating out, clothing, and gas.
The 50/20/30 rule is just one method to follow with planning your family’s budget. If you prefer, you can go category by category to decide how much you will spend in that area each month. If you choose this method, it may be helpful for you to cash your paycheck and then divide the cash among different envelopes, each labeled with a specific expense.
If you are worried about keeping track of your spending, having a limited amount of cash to use is an easy way to simplify things. You can also try using online budget software or other programs that link to your bank account and automatically divide your spending into predetermined categories.