by Becky Robbins

Created on: April 06, 2010

Budgeting without a plan of action will probably end in doom. The important part of using a budget is learning to live within. There are many factors to consider when putting together a family budget for the year. Unless you work together as a family, there will continue to be holes in your budget.

Discuss the budget as a family

This may seem counterproductive, but in fact, it is important that every member of the family understands the concept of the budget. As couple; without the children, discuss the specific figures of the budget. Then bring the family together and give an overview of the goals for the year. Children do not need specifics, such as the amount of the mortgage. However, getting everyone involved ensures the whole family is sharing the same goal. This is also an opportunity to begin teaching children the value of money and maintaining a budget.

Figure the family income and expenses

It is important to know how much money is flowing into the family budget. List all sources of income from the previous year, if there are no changes for the current year. If you managed successfully with the income brought in last year, continue living off that income. Any raises can be placed into savings or used towards any outstanding debts.

 Putting the family expenses down on paper can be the scary part. There are the essentials, such as utilities, food, and housing. There are also going to be extras, such as gifts, entertainment, and other luxuries.  Once you know how much is coming into the family unit and how much is being spent, you can see if you are spending too much. Subtracting the expenses from the income can yield a positive number, a negative number, or an even amount. Any income left over can be placed into savings or applied towards a goal. When there is a negative number, it is important to reduce expenses or increase income.

Adjust spending habits

Fixed expenses can be more challenging to reduce than variable or discretionary expenses. Look at your housing and car expenses. You may want to consider refinancing or downsizing in these areas. Perhaps increasing insurance deductibles or shopping around for better insurance rates will offer additional savings.

Variable expenses and discretionary items are easier to adjust. Shopping sales and using coupons can save you more than just food expenses. Another option is borrowing an item before purchasing it. There are even ways you can conserve utilities. Again, these are items that can be discussed as a family.

Know your goals

It is easier to maintain a budget if you have goals you wish to reach. These goals act as motivation. It is important to make sure you are on the same page as a family. Maybe the goal for the year is to finish paying off debt. Perhaps you have a family vacation you will be taking in the next year and want to really save for it. Allow the whole family to come together and decide what that goal will be together.

Creating a family budget may seem as though it will restrict family enjoyment. It is a great way to bring your family together and achieve short-term and long-term goals. By keeping track of income and expenses, you can make necessary adjustments easily. Review your budget monthly or quarterly to make sure you are on track for the year.

Learn more about this author, Becky Robbins.
Click here to send this author comments or questions.