Creating a Family Budget: Expenses

by Ruth Mayhew, Demand Media
    Create a budget for many years of financial independence.

    Create a budget for many years of financial independence.

    You finally snagged your first real job and you're living independently, responsible for things like a mortgage or rent, utilities, savings and investments, food, clothing and entertainment costs. After you take in this new reality and your new level of responsibility, the next step is to create a budget that allows you to maintain your lifestyle while still enjoying your independence. Creating a budget is an easy task and managing your finances is even easier if you create a budget that's both practical and realistic.

    Step 1

    Housing costs take a big chunk out of your monthly salary, but keeping a roof over your head is a priority. Take advantage of informative and helpful online resources for budgeting housing costs that include figures for mortgage, rent, insurance, taxes, upkeep and maintenance.

    Step 2

    Consider shopping around for homeowner's insurance at a premium that fits within your budget and needs. Determine the amount you need for replacement costs, personal belongings, additional insured items such as artwork and jewelry and the deductible amount you can afford. As your family grows and household belongings increase, raising your insurance coverage becomes a consideration.

    Step 3

    Continue your research on insurance costs when you budget for car insurance. Compare premiums and coverage using online resources and raise or lower coverage and liability amounts to suit your needs. Don't limit your research to insurance company websites, however. Find articles that provide information about factors that affect your insurance premiums, such as which cars are the least and most expensive to insure, state licensing and insurance requirements and driving habits.

    Step 4

    Review energy and utility costs for your home. Contact your electric, gas and water services providers for information on household energy audits. Ask about level payment plans. Level payment plans calculate your estimated annual usage to determine equal payments all year round instead of high and low utility bills that reflect seasonal fluctuations.

    Step 5

    Calculate the amount of money to contribute to investment savings and emergency fund savings. While young professionals new to the workforce may want to wait a short while before saving for retirement, budgeting for an emergency fund makes an excellent start to savings. Any money you put aside for emergencies will come in handy in the event you become unable to work, are laid off or have a substantial cash outlay for an unexpected expense.

    Step 6

    Add up the number of meals you prepare at home and how many times you dine out. If you and your family enjoy eating out, don't deprive yourself of all of life's enjoyments -- factor the cost of dining out into your monthly budget. Be practical about it, however. Unless you choose to spend an exorbitant amount of money in restaurants, figure up the cost of groceries for cooking meals at home. Cooking at home can be fun and enjoyable, as well as less expensive than eating out all the time.

    Step 7

    Define how much your family spends on gasoline, clothing, lawn maintenance, professional association or club dues, entertainment or travel, and cash contributions to charitable organizations. Amounts for these items are within your control more so than housing, utilities and insurance. Even if you don't currently have expenses in these areas, as your earnings increase, you'll find increasingly more areas where you can spend your discretionary funds.

    Tip

    • CBS News' financial adviser Ray Martin gives readers some insight about debt-to-income ratio: "Most lenders have typically used a '28-36 guideline' to measure an individual's ability to buy and afford a house. Under that rule, a family's monthly housing expenses, which include principal, interest, taxes and insurance, should not exceed 28 percent of the gross monthly income. Other debts, such as credit cards, car loans and school loans should not exceed 36 percent of the gross monthly income."

    About the Author

    Ruth Mayhew began writing in 1985. Her work appears in "The Multi-Generational Workforce in the Health Care Industry" and "Human Resources Managers Appraisal Schemes." Mayhew earned senior professional human resources certification from the Human Resources Certification Institute and holds a Master of Arts in sociology from the University of Missouri-Kansas City.

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