The biggest advantage of working with a family budget is that it tells the budget planner where the money comes from, what the money is spent on and how much money is left to build future financial wealth.
Many families choose not to budget because they find the task of drawing up a household budget too daunting. Fret not. With so many user-friendly budgeting tools available these days, anybody can plan a family budget. Here are some useful household budgeting tips for the uninitiated.
Plan a Family Budget without Distractions
Working on a budget is serious business. So it’s important to plan a family budget without distractions, says money expert David Koch, co-author of Kochie’s Guide – Creating and Building Real Wealth with lots of Love and Laughter [Wilkinson Publishing, 2009].
“Put aside a night after the kids have gone to bed or older children are out of the house to get your finances back on track and start your search for that elusive savings dollar,” Koch says. Once the kids are out of sight, take out bank accounts, credit card statements, pay slips and other bills.
List Family Income
A good way to do a budget is to see how much money came in and how much was spent in the past year. Get a blank piece of paper or open a new spreadsheet on the computer to list all income the family receives. Or better still, use one of the many free and friendly online budgeting tools from bank websites. Income comes in many forms, including salaries, pensions, rent from investment property, government benefits, dividends, interest, child support and bonuses. Write down the money coming in each week, each month for a year and add up the total.
List Family Expenses
This is often the scary part of doing a family budget and seeing how much was spent on what can get couples into a shouting match. So make a pact not to delve on previous spending habits before listing out family expenses for the past year.
Family expenses include essential spending on utility bills, household expenses, education costs, rent, mortgage and loan repayments as well as luxury spending or extras like entertainment, birthday parties, gym membership, spa treatment, dining out and holidays. Write down the money spent each week, each month for a year and add up the total spent for the whole year.
Review Household Spending Habits
Subtract the expenses from the income. If the result is positive, the budget is right on track and there may even be spare cash to save up for future uses. If, however, there is a deficit, Koch says it’s time to review the family’s spending habits and work out how to increase the family income or reduce family expenses.
He also stresses the importance of regularly reviewing the family annual budget, updating the budget when there is a change in the family’s financial situation and ensuring everyone stick to the budget.
Couples who have yet to do a household budget should seriously consider creating one. First, make sure there are no distractions when planning the budget. Then list all the family income and expenses for the past year. Work out if there is a surplus or deficit in the budget. Review the budget and work out ways to slash family spending if there is more spending than income.
Found this article useful? Read also Successful Household Budget Management, Family Budgeting Tools and Balancing the Family Budget.
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