While every family has unique financial considerations, the typical American household has many common types of income and expenses. Like most other families, you'll likely have to shell out for rent or a mortgage, food, gas, possibly a car payment or two, insurance and utilities each month. Starting with basic budget categories will help you create a workable financial plan to map out a stable, financially sound future.
You won't know how much you can spend until you know how much money you have. To start your family budget, list all sources of income and potential income, recommends the Better Business Bureau. Your income might include wages, salaries, interest, dividends, child support, alimony, pensions or Social Security. You may be able to raise money during the year through a second job, garage sale or selling assets. If the folks are still giving you cash for Christmas and birthdays, factor that in.
Expenses that don't vary in amount and that occur regularly are fixed expenses. For example, if you pay $500 per month in rent each month or have a car payment of $300 per month, those are fixed expenses. Other examples of fixed expenses include cable, Internet, loan payments, health insurance and tuition. Your housing expenses should not be more than 30 percent of your income, recommends certified financial planner Kim Dignum in the CNNMoney.com article, "The Ideal Budget."
Expenses that change in amount each month are called variable expenses. Phone, gas, electricity and groceries are examples of what might be variable expenses, although some of these, such as the phone bill, might also be fixed. The amounts of some of these variable expenses may be so similar each month, such as groceries or gas, you might want to classify them as fixed expenses for budgeting purposes because you know you'll have to pay them each month. If you're just starting to share household expenses together, backtrack about six months to see what each of you spent, and if your spending expectations are the same.
Some family budgets have built-in savings goals. These might include putting away money each month for retirement, children's tuition, an emergency fund or an annual family vacation. You can include a monthly amount for one or more of these as a fixed expense in your budget. Money is a key contributor to marital discord, and before you plan your first budget, you'll need to have a frank discussion of your life priorities.
If you can accurately project the average amount of all of your expenses, including your monthly spending on gas, groceries, the phone bill and other variable expenses, you can create an monthly family budget. If you pay your auto insurance quarterly, you can average your total annual premium payment into monthly amounts to help with record keeping. Creating a family budget based on averages will let you see, in advance, how much you need to earn or save each month and how much you can spend each month. Don't forget, though, to include occasional expenses, such as gifts, vacations, car repairs, major purchases of appliances or furniture and any subscriptions or annual dues for membership, in your budget or you may find yourself always running short of funds.
If you want to make sure you have enough money to pay your bills each month, you can create an annual budget plugging in actual expense numbers when they come due. For example, if you have a $400 insurance premium due in July, you will need to make sure you have enough money that month to pay that bill. This might mean spending less that month, or the previous month or months. Closely tracking where you actually spend your money will help you create an even more accurate budget in the future.
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.