Starting a Budget for Your Family

Budgeting is no doubt one of the most efficient and effective means of controlling your money. Quite simply, if you don’t know how much money you have or how you are spending it, you’ll never be able to manage it. If you don’t manage your money, you will overspend and be susceptible to debt and credit  problems.

Creating a budget should be a first priority for anyone with financial obligations and will be a major step in the right direction if you are on a mission to get out of debt. Here are some useful tips for setting up the household budget from the start and the importance of sticking to it for the long haul:

Step One – The Tracking
Before you can sit down with pen and paper, you need to understand how you spend your cash. It will take a good month of constantly tracking each and every penny you spend. No matter how insignificant that pack of gum may seem to you, it is an expense. Keep a notebook with you at all times and write it all down.

Step Two – The Sit Down
After a month of expense tracking, bring your notebook to the table along with all of the bills you pay each month. Include all your credit card bills, mortgage payments, loan payments, utilities, cell phone bills, child support, membership costs, and anything else you pay. Also, have copies of all your regular income.

Step Three – Add and Divide to Conquer
Grab the calculator and start adding up the numbers. Start with your income. Make sure in addition to your paychecks, you include child support, alimony, side income, and any other regular income you bring in each month. Set that aside and grab your expense tracking sheet. For each week, categorize your expenses by type, such as “food”, “entertainment”, “healthcare”, “gas”, “home maintenance”, “car maintenance”, ect…Next, add up the totals in each category. Now, take the amount of your income and subtract the amount of your expenses. What kind of number do you get? If it is a positive one, you are doing okay with some to spare. Perhaps if you haven’t started a savings plan, you now know how much you can afford to put away each month. If the number you get is a negative one, move on to Step 4.

Step Four – Make the Cuts
If your number comes up negative, it’s time to get the red pen and start making some decisions. You’ll have a good idea now of what you are spending on housing costs, entertainment, food, and such. Now is the time to start cutting down those cost by reviewing the actual amount of money you are spending. If your number is really in the negative, you have to start learning to live within your means. A budget will help keep you on the right track. Cut out all the expenses you can at this time. You can always add them back into your life later when you are more financially stable.

Step Five – Make Your Choices
If your number was negative and you’ve made cuts but still do not have enough of a cushion to really work at getting out of debt and developing a strong savings plan, you may need to consider how best to increase your income. Should you get a second job? A new job? Ask for a raise? Now that you know your financial situation and can see the big picture, you’ll be able to make stronger, more financially intelligent choices for your entire family.