How Do I Build a Family Budget?

Use recent bills to help guide you in budget planning.

Use recent bills to help guide you in budget planning.

It's easy to create a family budget, based on the many sample budgets available free online and in books you can check out at your local library. Using the simplest of computer spreadsheets or even paper and pencil, you can build a budget by listing your expected income and expenses, and dividing them into monthly columns.

Discuss your financial goals with your partner, since your priorities may differ. One of you may want to focus on credit card debt, while the other may want to begin retirement savings. You may have differing opinions on the need for a rainy day fund versus saving for a home down payment or annual vacation.

Write a list of income sources you expect to have during the year. This will include your salary or wages, interest earned, gifts or even money generated by yard sales.

Write a list of all of your expected expenses. Start with expenses you'll incur every month, such as electricity, groceries, car payment, cable, rent and phone. Collect copies of last year's checking account and credit card statements to help you. If you pay bills using cash or a service such as PayPal, write down what those bills are, when they are due and how much you pay. The Better Business Bureau provides a comprehensive list of expense categories on its website, providing a complete sample budget (see Resources).

Divide your expenses into fixed and variable categories. Fixed expenses are the same amount each month, such your rent or mortgage, car payments or student loans. Variable expenses vary in amount each month, such as grocery bills, utilities or dining out. Over-budget on groceries, recommends consumer finance radio talk show host and author Dave Ramsey. Many people underestimate this expense area.

Note which of your expenses are discretionary, such as dining out, entertainment, clothing and other purchases you don't have to make. This is where you will start cutting expenses if your budget reveals you don't have enough income to cover your projected expenses.

Create two budgets: one should show your average monthly income and expenses, the other your actual monthly income and expenses. For example, in your average monthly budget, you will divide your annual auto insurance premium by 12, and place that amount as an item in each month's expense column. In a real-time budget, you will record those payments in the months they come due (for example, quarterly payments). Having average and real-time budgets will help you manage your cash flow so you have enough cash each month to pay your bills. Include expense categories such as a rainy day fund, family vacation, debt reduction or retirement contribution as discretionary expense items.

Compare your total income to your total expenses for the year and make any adjustments to your budget. If your year-end totals are close, consider cutting expenses earlier in the year in the event you have an emergency that requires you to make unexpected payments. For example, if you own a car and it dies during the year, you may need to make a car purchase that requires a down payment, monthly payments, or a one-time purchase payment.

Items you will need

  • Recent credit card and bank statements
  • Computer spreadsheet
  • List of projected annual income and expenses

About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.

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