Make a Family Budget
Creating a budget could provide your family with some much-needed direction and sanity. Along intelligibly defining where you want your money to go, also as examining your spending habits, you’ll be able to set your family finances on a course that will allow you to achieve your long term goals. Additionally, you’ll make smarter options in the future on what you should do with the money you work so hard for.
The 1st step in budgeting is making a list of your expenses. This is crucial – you must figure out where all your money is going! To do this, you will need to create an expense record. The best way to do this is to carry a notebook around with you and record where all your money is going. While online banking tools, financial computer software, and the like can be useful for plotting large movements of money, your notebook will let you examine everything down to the smallest cash transactions. These are often the areas of your financial life that need the most help.
Try carrying this notebook around with you for a month, recording everything. At the end of the month, review your expenses, and add other expenses, such as bills, paid by direct checking account transfer or other means. Give all your purchases a general category. After you continue this system for 2-3 months, you will be getting a good picture of your financial status and spending habits. Add periodic expenses to your list, such as annual insurance fees, summer vacation expenses, etc.
The other half of your budget involves totaling up your income. Write down the jobs for which you or your spouse receive wages. Add any additional income you may receive over the course of a month, such as dividend or interest payments, bonuses, etc. Take your wages and other payments, and calculate your net monthly income.
After using this system for a few months, you should have a pretty good picture of your expenses and expected monthly income. To create your budget, take the expense categories you created from your notebook, and list them as rows in a notebook or spreadsheet. Create a column called “projected expenses”, listing what you expect to spend each month in each category. Then, create twelve more columns listing months in a year.
Each month, record what you actually spent in each category and compare it to your projected expenses column. From here you should be able to determine if you were under budget or over budget, and by how much. If your expenses exceeded your income for that month, you will need to focus on finding ways to decrease expenses or increase income.
Decreasing expenses may be easier than you think, once you have a written budget and a goal to work toward. You may only need to look at some of the categories and find ways you can reduce spending by a small amount. If you do this in enough categories, your total spending for the month may end up staying within budget. Another good tactic is to make a list of the most important things in your budget, preserving spending in those categories, and finding creative ways to reduce spending in the other categories.
Whatever your chosen method, following these techniques and following a written budget will get your family on the road to financial stability, wealth building, and eventually, financial freedom.
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In: Personal Finance · Tagged with: budget, financial freedom, income, long term
