Developing a family budget is something that needs to be done whether you are making minimum wage or well into the six-figure range. It does not matter how much money you make if you are spending all of it and living from paycheck to paycheck. A family budget allows you to identify and reach your financial goals -- saving money, planning for a large purchase, taking a vacation or funding a child's education -- without going broke before your next paycheck.
A budget is a plan that separates your priorities when it comes to spending money. A budget allocates the amount of money that you spend on your bills and other necessities as well as the amount you spend on entertainment and recreation. Developing a budget is critical to understanding how you spend your money.
When putting together a family budget, first look at the amount of money that you have coming in. Add together all sources of expected monthly income and take note of any expected bonuses throughout the year. When determining your income, do not count the money before taxes and other deductions; make sure that you are adding the figure from the net amount.
Next, add together all the expected expenses you have each month. This includes monthly fixed bills as well as those that vary from month to month. For better accuracy, keep track of everything you spend money on for two or three months to get an average of what you spend. Document this information in an itemized list that is separate or next to the income column.
Categorization and Review
Categorize each item so that it is easier to add and subtract items that you may have forgotten or items that are not necessary. Label categories specifically so that they list items that are necessary for the household, child-related expenses, health care, car-related expenses, loans, utilities, food and entertainment. Once you have a list of your income sources and the expected expenses throughout the month, review this information and determine if you need to reduce or eliminate unnecessary items. If the amount that you are bringing home exceeds the amount that you are spending, then you are on the right track. If you are spending more than you are bringing home, you need to allocate percentages to each category so that you do not exceed your limits or find a way to increase your income.
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