Family Budgeting: Time for a New Start

November 9th, 2009 |

If you’re looking at this, it’s probably because your family budgeting efforts are failing. Clearly, it’s time for a new start. The way to start over is to approach your family budgeting efforts from a new angle. The key is not to restrict yourself; it’s to use your money to its fullest while reducing unnecessary expenses in order to free yourself from the arguments and stress that the typical approach to budgeting causes.

A budget is nothing more complicated than a list of recurring, anticipatable expenses and sources of income, laid out in detail to determine how the family income and outgo relate to each other. In addition to the family’s basic expenses, a good budget also has spaces for allocating money to emergencies, vacations, savings, and possibly retirement plans.

Here’s how to put together a solid budget:

First, start collecting paperwork. You want to gather every bill and every proof-of-income from the last three months. Add up all of the bills onto separate lines of a spreadsheet (i.e. all three electric bills add together, all relevant paychecks added together, etc.) Divide each line by 3 to get a passable average in each category. Some family budgeting experts say you should go back a year (and divide by 12); the choice is yours.

Once that’s done, compare the numbers. Are you making more than you’re spending? By how much? If not, where is the extra money coming from? What are your biggest expenses? Can you reduce them somehow?

Don’t forget to include in your family budgeting effort an amount for trivialities like movies, eating out, and other “fun” stuff. Be reasonable, but not ultra-conservative. Give yourself enough to let loose at least twice a month. Similarly, don’t forget to add budget items for eventualities like vacations, emergencies like car repairs or hospital co-pays, and the like.

Next, if you don’t already have one, open some form of savings. The standard option is a savings account. If you’re certain you’ll have the same amount every month to transfer into savings, consider a vehicle like an annuity that grows more quickly but requires regular monthly input.

Keep re-examining your budget at least every three months. Continuously look for ways to reduce expenses. Keep solidly in mind this maxim: only by spending less than you earn will you ever be free of the stress. And isn’t that precisely what family budgeting is for?

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