Budgeting – it’s one of those words right up there with dieting, decluttering and dental work for most people! It doesn’t have to be. Many envision it to be hours of paperwork resulting in a life with no fun and eating bean soup day after day. Budgeting shouldn’t a dreaded chore and with a little effort if can increase your financial standing and remove the stress of living paycheck to paycheck. Every family needs a simple budget.
So, where do you start? Like a handy road map, a budget shows you where you are and how to get where you’d like to be financially. A budget is not something that slows you down, but rather a ticket to expedite your financial journey. Let’s look at these easy steps to set up a simple family budget.
10 Steps to Set Up a Simple Family Budget
- Keep it Simple.
There are so many options today for managing finances. From accounting software, spreadsheets and mobile apps there are several choices, or you can simply use paper and pencil. For some, the idea of writing it all out sounds tedious, but for others learning a new computer program is just another tasks to find time for. Whichever way you decide, just make sure it is simple enough to use and easy to implement.
- Decide Your Financial Goals.
Before you look at the numbers, choose where you’d like to end up. What would your preferred financial future look like? Would you like to be debt-free? Are you longing to own a home of your own? Have you adequately saved for retirement? Financial goals are important because they will direct your spending priorities.
- Gather Your Financial Records & Statements.
Collect your pay stubs, bank account records and bills. You will need to be able to determine your monthly income and expenses.
- List Your Fixed Expenses.
The most common categories are:
- Tithes & Offerings
- Savings
- Housing – mortgage or rent payment
- Utilities
- Transportation
- Insurance
- Loan & Debt Payments – this would include credit card balances
This list is by no mean comprehensive and you may end up with subcategories under each category. Look over previous bank statements and see where your money has been going.
- Assign Pay Dates For All Expenditures & Determine Remaining Funds for Variable Expenses.
Look at the due dates on all expenses and determine which pay period will cover each one. Then divide the payment accordingly and subtract all payments from the assigned pay. There should be a remainder left to cover variable expenses. For example, if from your paycheck received on the first of the month you pay tithe, rent and insurance, you will total those payments and subtract them from your take home pay. This should leave you will remaining funds to designated for your variable expenses for that pay period.
- Divide Remaining Funds & Assign Variable Expenses.
At this point you must assign amounts for your variable expenses. Variable expenses are those that do not have a pre-determined payment amount.
These expenses include:
- Food
- Fuel & Auto Care
- Personal Care
- Entertainment
- Allowances for Family Members (for their discretionary spending)
- Buffer Cash
- Determine How You Will Handle Variable Expenses.
At this point you will have to determine with your spouse, how you will distribute and manage your variable expenses. For many people it is best to withdraw this amount in cash and use some type of envelope or divided accordion wallet to divide the cash and keep the receipts. A lot of people just use their debit card and if you are able to keep detailed record of each transaction and maintain a spending log that just fine. However, this doesn’t remove the temptation to pull out the plastic debit card and overspend. Be honest with yourself when making this decision.
- Implement Your Spending Plan Immediately.
Don’t procrastinate. The longer you wait to attack your financial issues, the larger they will grow. Jump on the plan and make it work. A well planned and laid out budget does no good unless implemented regardless of how great it looks. Decide which family member will pay the bills and get the variable spending cash from the bank, if applicable. Set up auto-pay which is usually free at most banks and will save time and postage. Plan to put these steps into place the next time you receive a paycheck.
- Review & Adjust Your Budget as Needed.
You cannot set your budget and let it ride. It will have to be reviewed and adjusted periodically. You may notice that the amount you’ve designated for your electric bill is around $20 less than the actual statement. You will need to adjust your budgeted amount. I would recommend that you round up all fixed expenses that many vary a few dollars each month. This will keep you on budget and leave a few extra dollars in your checking account as a buffer.
- Make a Commitment as a Family to Stick to the Budget!
It has to be a team decision and a team effort. Do everything you can to make it an easy transition for your family. Prepare good meals and fun times at home so life is still rich and full for everyone. Still have date nights with your sweetheart, but make it a romantic time without breaking the bank. Plan for holidays and birthdays and create new traditions instead of excessive spending. Learn to be frugal together and you will all reap the benefits!
Budgeting doesn’t have to be an overwhelming task. Take these steps and set up a simple family budget today!