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5 Steps to Planning a Family Budget


A new family budget can be created with some easy planning. First, you will need to gather all of your financial information, including income sources and expenses. Be sure to include all income sources that are used to pay regular bills. The budgeting process will help you sort out your finances and make it easier to be more responsible about handling your finances. Budgeting is the important first step in planning a family budget, to keep up with rising costs of living. The family budget is also a tool for teaching children about finances to empower them with their own money management knowledge.

1. Determine Your Family's Monthly Income Earnings

This amount will total all of the take-home pay after taxes and other funds from sources such as interest, rentals and other places. Include all income from all members of the household that participate in paying the bills. For example, if you have children who work, that income is probably not going to be factored in.

2. Create an Expense Chart

List out all expenses including basic necessities such as rent or mortgage, insurance, utilities, vehicle expenses, food, cleaning supplies, school and transportation costs and other regular incidentals. Include automatic savings and entertainment costs. Listing out absolutely everything you spend money on regularly will provide an opportunity to thoroughly review expenses.

3. Determine Monthly Spending

Some of your expenses may come regularly as a monthly bill, while others may be weekly, quarterly or annually. Divide or add the amounts so that each item is represented as a monthly expense amount. Include a reasonable amount as a cushion for bills that fluctuate, such as utilities, food and other incidentals. To arrive at these figures, go over spending for several months to determine an average. Also include a sum for any unexpected expenses that may occur.

4. Compare Monthly Income against the Expense Chart

Take the totals for monthly income and expenses, subtracting the lower number from the higher. You will either have a surplus or deficit for the income amount. If you arrive at a surplus, you may design a budget to include saving or investing more. If the amount is negative, this will indicate that you are overspending, and it will be necessary to cut more costs to get within a reasonable and workable budget.

5. Balance the Budget

Review all of the numbers on the expense chart. Consider how you can reasonably cut spending for each item. For example, it may be possible to spend less at the supermarket if you pay attention to sales in lieu of higher priced merchandise. If you tend to go out to restaurants frequently, you can choose to eat at home more often. Utility costs can be cut by turning off what is not being used. Make cuts where they are reasonably possible, mindful of actual living realities. After cuts are made, re-balance the budget. Arrange to send extra money into a savings or emergency fund as is feasible. Review the budge regularly, especially when considering major purchases.

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