How to Create a Family Budget: A Step-by-Step Guide
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With my growing family, I know firsthand the importance of creating a family budget. When we became a family of three, suddenly things became very real and we began wondering if we could afford everything our children would need. We knew we needed to make a change, so we decided to create a family budget. What worked for us was putting pen to paper and having it written out in front of us.
The project was a lot less daunting when we could see the numbers in front of us. I’d recommend checking out some Budget Planners, as a sort of plug-and-play method of figuring everything out. Else, you can always just start with a pencil and a notepad and add as you go!
Step 1: Determine Your Income
When we sat down to create our budget, the first thing we did was determine our income. My husband's income is fixed, but mine can fluctuate depending on my team’s quarterly sales. We looked at our income over the past several months and averaged it out to get a more accurate estimate.
Step 2: List Your Expenses
Next, we made a list of all our monthly expenses. We started with our fixed expenses like mortgage payments, utilities, and car payments. Then we moved on to variable expenses like groceries, entertainment, and clothing. We also included irregular expenses like car repairs and annual insurance premiums.
Step 3: Categorize Your Expenses
We then categorized our expenses into needs and wants. We realized that we were spending a lot of money on wants like eating out and buying new clothes. We knew we needed to cut back on these expenses to focus on our needs.
Step 4: Set Priorities
Based on our categories, we set priorities. Our top priorities were our mortgage, utilities, and groceries. We knew we needed to make sure we had enough money for these expenses before we could focus on anything else.
Step 5: Create a Plan
Using our income and expenses, we created a plan for how we would allocate our resources. We started with our fixed expenses and prioritized our needs. Then we allocated funds to our variable expenses based on their importance to our family. Finally, we set aside some money for saving and investing.
Step 6: Review and Adjust
We knew that creating a budget was an ongoing process, so we committed to reviewing our budget regularly and making adjustments as needed. We tracked our actual spending against our planned spending and adjusted our budget as necessary.
Creating a family budget was a game-changer for us. We were able to pay off our debt, save for emergencies, and even start saving for our children's education. It took time and effort, but it was well worth it. I encourage every family to create a budget and start taking control of their finances.
