How to Create a Family Budget

Financial planning is an important integral part of taking care of the family. When you have a clear-cut understanding of what your family income looks like or how it should be allocated, you make your family stronger and better. It helps you pay real attention to what you spend money on and whether it is worth it or not. Having a family budget is much like other essential parts of parenting, making the meal, cleaning the house and what not. 

You will never know how your money disappears and whether you can afford to buy something or not if you don’t have a budget. Yet creating a family budget will empower you to know what you can and cannot do with your money avoiding debts, loans, unexpected surprises, etc. With family budget, you will learn to live a quality life which will include all the necessary and wanted things, but will keep you away from stupid and unnessary ones.  

This article breaks down the step-by-step development of a family budget, and if you want to be wiser with your money, read it and share it with friends.

Start with family budget estimates

Let’s see what the first phase of starting a family budget looks like. Experts say it is good to start with estimates and scheduling. They help you be accountable to one another as well as you ensure transparency and clarity. You can start with analysing all financial resources of household members, and let’s call it an audit of everyone’s finances. Note down some important financial information such as what you have in savings, what loans and debts you have that must be returned in the nearest future, what your monthly payments and necessary expenses are, etc. This will be your draft or an overview of required expenses that need to be listed.

Create a baseline of your expenses

The next step after making a draft is to make a list with actual amounts that you have estimated. Lots of people underestimate their expenses. That is why disclosing the real numbers is a new and sometimes unpleasant experience. Focus on tweaking your finances and you will have more room for a good budget and life savings. For example, maybe there is an old subscription and you forgot about it, but now it came to your mind, and you are ready to cancel it. Sometimes you buy things in the supermarket or shopping center that you will never use or they will be used for one or two times only. Then you should reconsider your shopping behavior. If you suddenly figure out that you pay too much interest on your loans, stop it, and prefer waiting for some time for your special goal, but don’t turn to the bank for non-profitable and money consuming loans. Now you reduced and eliminated some expenses, and this means you already know where the family money was going. And as you know how to deal with the money in your pocket, you will be more successful in creating a family budget.

Set out the way of budgeting

Well, it’s time to move on to the core of budgeting. Not only the outgoing money is important, but also the incoming one. Jot down the monthly take-home pay of all adults in the household. There are various approaches to budgeting and Avid experts looked through nearly all of them to bring the best one for you. Of all budget types, we like splitting it into three main parts and as a result, you have 50/30/20, where 50 % is for the important needs, including groceries, basic utilities, transportation, and insurance fees, etc., 30 % is for the wants and leisure such as traveling, eating out, shopping, buying gifts, and 20 % of the income is left for the savings as an emergency fund.

Learn more about budgeting, by reading another Avid article.

The family that budgets together, grows together. Budgeting together may seem difficult in the beginning and you may feel awkward, but soon you will love it as you see the results. Family budget is not easy but it is not about a ton of work, so everyone is advised to be a part of family financial planning and deal wisely with the income.