Building a family budget that works for you is not hard or complicated. It does require giving some thought to your values and attitudes about money, getting some figures together, putting on paper how you want your money to work for you, sticking to your plan no matter what, and adjusting it as necessary. People who find planning tedious tend to avoid it, but it is a necessary investment toward achieving your goals. Here are four keys to consider when securing your family's budget.
- Begin With a Financial Inventory
How much you should budget for certain things hinges on knowing how much you have to spend and what your financial priorities are. These are the two most time-consuming and agonizing tasks for most people because they require some footwork and decision-making. Ideally, you should track every penny for at least a month to see where your money truly goes.
Start with these 4 steps:- To determine how much you have, gather your pay stubs, bank statements, and cash. List your net income, bank account balances, and cash.
- To see how much you owe, gather all bills, statements, and contracts. Remember to include any personal loans you need to repay. Unless you use budget software or a household budget book, the easiest way to organize this information is using a columnar pad you can buy at office supply or mega marts. Record the company name, payment due date and minimum, amount paid, date and source of payment, and remaining total balance.
- Decide and prioritize how you want to spend your money based on your goals or a bill's necessity. List savings, investments, tithing or charitable giving, groceries, and clothing as expenses so they don't become afterthoughts.
- Ink the prioritized obligations on a clean page. This is your inventory and checklist for each month.
- What You Should Take Into Account When Budgeting
- Budget everything. You can adjust it later.
- Pay yourself before your creditors. This is your long-term, short-term, and emergency savings funds, respectively.
- Regularly set aside 2-10 percent until you accumulate the equivalent of three months' salary for emergencies like car and home repairs, medical expenses, and long distance travel for funerals. Building your emergency savings takes priority over paying off debt.
- How Much You Should Budget Based on Your Family Size
Recommended figures vary depending on who and why you're asking. Generally:- Charitable gifts – 10-15 percent of gross pay
- Savings – 5-20 percent gross
- Housing – 25-35 percent of net pay
- Utilities – 5-10 percent net
- Food – $10-$25/day net for a family of four
- Clothing – 2-7 percent
- Transportation – 8-15 percent net
- Medical/health – 5-10 percent net
- Entertainment – 3-10 percent
- Personal – 5-10 percent
- Credit cards/loans – 5-10 percent
- Mistakes To Avoid
- Spending extra money as soon as you get it, like tax refunds or work bonuses.
- Budget based on two incomes. What if something happens to one of them?
- Skipping savings deposits or making non-emergency withdrawals.
- Impulse buying. Wait until tomorrow. Repeat daily.
- Don't forget to account for everything, such as diapers and clothing.
