Creating a family budget
Are you having marital problems because of money?
Maybe you need a financial check up:
- Do you have financial goals or are you simple spending as get money?
- Are you spending more than you earn?
- Do you regularly pay yourself when you get your salary?
- Do you save and have a saving plan?
If you answered no to questions 1, 3 and yes to questions 2, 4 then you are on your way to financial disaster. Your marriage and family are also threatened.
You need to create a family budget
A family budget is simply a plan on how to so spend, save and invest the money or income your family gets. That has tremendous benefits.
Benefits of a family budget
You will be able to have
- More time to spend with each other.
- Peace of mind – no more fights over money
- Satisfaction of being able to reach goals of travelling, saving, retirement fund etc.
- More disposable income to buy rather than borrow to acquire the things you need
In you have a family and especially if you have kids its vital that you create a family budget. A budget helps you to control and manage your income and expenditure. Failure to control your money can and do indeed lead to marital disaster.
It is much like not controlling your food. If you consistently eat the wrong things (fast food and junk food) and don’t exercise you will eventually become overweight and get associated problems.
Have a system – a family spending plan
Darrel from the St Louis Credit Union says we should have goals. These goals will guide our spending budget.
There is short term, intermediate and long term goals. He gives 5 steps to set up a spending plan.
- Identify where your money maybe leaking out
- Track spending and find ways to save
- Set up short term and long term goals
- Track and audit your progress
- Use financial tools to reach goals
The first thing you need to do is to set financial goals
Short term goals: goals for items like games, clothes, tools etc
Intermediate goals (1-5 years): car, house
Long term goal (more than 5 years): retirement fund, college fund for the kids
To get our short term you should look for ways we are wasting money (spending leaks) and save this money to get our short term goal items. For example we may be spending money to buy lunch when we could save buy having a pack lunch. Other areas of spending leaks include late payments, traffic tickets/fines, buying unnecessary items that you don’t use like monthly gym fees.
To get your intermediate items we will save for them. This may mean we have to get extra income or use the money from the spending leaking. You should always save some money from your income every time you get paid.
How to achieve your long term goals of retiring, going on holiday or sending kids to university.
To get your Long term goals you need to invest.
Lets look at how you can create a simple family budget
The first thing you have to do is look at how much money is coming, and where the money is going. Some people call thing income and expenditure.
Write down every single income or money you and your spouse are getting – salaries, rents, dividends etc. Then you also write down everything you are spending – fixed expenses (rent/mortgage, debts/loans, insurance, car payments) variable/flexible expenses (credit cards, food, utilities, telephone including mobiles, clothes etc). Periodic expenses (tax, insurance). Incidental expenses (drinks, cigarettes, magazine/newspaper subscription etc.).
Tacking family budget or expenses
How do you actually keep track of these expenses? Here are several ways
- The receipt method. This is where you keep the receipt of every expenditure you make. You then look at these receipts every month to see how you are spending your money
- The envelop method. You get several envelops and write the name of what money is for on each envelop. You then put cash in the envelop and manage the money for each item over the period of a month. If the money runs out before the month then you have to wait until the end of the month for more money to be put in the envelop.
- Cheque book ledger or banking. People who use cheques and bank cards to pay for everything have a way of seeing where and when they spend their money when they get their statement.
- Account book. This is where you write down all your expenditure at the end of every day. This helps you to keep a track of even the small items like gum or sweets.
- Then there are software like spreadsheets or special software that can keep track of your expenses.
Tracking can show you where you might be having a money leak. Buying lunch, cigarettes or even impulse shopping can really add up.
Balance income and expenses
Check how much you are spending by adding it all up. Compare that against what you are earning. If you getting more money than you are spending, then you can save for your goals. If you are spending more than you are receiving – then you have 2 options
- Find ways to make extra income by either getting an extra job, doing freelance work or selling some items that you are not using in your house
- Find ways to spend less and stop the leaks
This needs to be a family decision so everyone is on board and will help to make the plan work.
For more ideas on how to make a family budget check the people at St. Louis Community Credit Union