Tracking Expenses for Family Budget Planning
How to Track Household Expenses and Better Understand Home Finances
Oct 9, 2009
The first step in family budget planning and understanding family finances is knowing where the money is going. Tracking expenses will help a family to clearly see how much money is needed to run the home, and uncover where money is being spent on unnecessary purchases. This knowledge can also help empower family members as they gain clarity around personal budgeting and spending habits.
Understanding Fixed and Variable Household Expenses
When tracking expenses, it is important to understand which items are fixed household expenses and which are variable spending amounts. Knowing what percentage of household spending breaks down into each category of expense can help empower a family to make better purchasing decisions, and assist with creating a working family budget.
Fixed expenses, also known as non-variable expenses, refer to those items in a home budget that essentially stay the same month over month. Fixed household expenses typically include:
- mortgage, rent and property tax expenses
- car payments
- cable, basic telephone and Internet costs
- home, medical and car insurance premiums
- utility costs, such as hydro and electricity, if budgeted through a yearly plan with the utility provider
- child care expenses
Variable expenses refer to items in a home budget that vary in cost from month to month. Variable household expenses typically include:
- food expenses, including grocery budget and costs of dining out
- transportation costs, such as gasoline, bus and train fares
- entertainment costs
- clothing and gifts expenditures
- car maintenance costs
- pet care expenses
- utility costs if the family pays by usage each month
The Impact of Essential and Non-Essential Expenses on Family Budget Planning
Fixed and variable expenses can be further broken down into categories of essential and non-essential spending. This detailed view can help a family determine individual and group priorities, and will go a long way toward identifying opportunities to cut costs when planning a home budget.
Determining essential and non-essential expenses will be unique to each family. For example, one family may feel that dining out is a non-essential expense whereas another family might count a monthly restaurant meal as an important part of the family's entertainment budget. For this reason, it is important for each family to discuss these expenses and prioritize as a group when planning a household budget.
How to Track Expenses to Create a Better Understanding of Household Finances
There are many tools available to help a family track expenses and get started with family budget planning. Budgeting systems can include processes such as keeping a budget binder updated with pen and paper, a home budget spreadsheet on the computer, web-based budgeting systems, or full-blown budget planning software.
Whatever budgeting system a family adopts, some key elements for tracking expenses will remain the same. Namely, it is important to remember to make note of all money spent, regardless of the amount. One of the easiest ways to do this is to have each family member request receipts for all expenditures and log those receipts into the family expense tracking system. This is especially important in the initial fact-finding stages, typically a 30-90 day period, when a family is working to determine just where money is being spent.
Expense tracking is a process of discovery that can go a long way toward helping create a working family budget. With a little time and effort on the part of family members, the information gathered from tracking expenses can provide greater insight into home finances, assist with family budget planning and make a household budget easy to create and implement.
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