Creating a Family Budget 101

Creating a family budget may seem overwhelming at first, but with these suggestions and helpful hints hopefully families will see how and where their money is spent and what they can do about it.

Are you in need of a family budget? Having a family budget is imperative for not only for making your money last all month but also for getting out of debt and saving for the future. A budget won’t create new funds but having a budget will help your family see what is available and where it needs to go first. (And hopefully how much will be left over.)
Creating a family budget may seem overwhelming at first if you’ve never been on a budget before but really the first step is just to gather all of your financial information and create a folder for each of the following:
Step 1
Installment Debts: These are monthly payments such as credit cards payments, mortgages, installment loans, and car payments. Find your outstanding balances, minimum monthly payments and interest rates.
Step 2
Fixed Monthly Expenses: This would include monthly, routine bills like utilities, phone, insurance, cable, and rent. It doesn’t include expenses like food, clothes or gas. We’ll cover those later. Some of these items will vary a little from month to month, so you will need to estimate as best that you can.
Step 3
Income: Add not only your check from you main occupation, but also other sources like child support or alimony. You will need this information in order to create an accurate budget.
Step 4
Net Pay: Now, add up your monthly net “pay,” from all sources of income. Add up your installment debt and fixed monthly expenses. Subtract the expenses from the income and the difference is your net margin.
Step 5

Essentials and Entertainment: Keeping this net margin number in mind, figure out what you need to cover essentials such as food, gasoline and clothing as well as what you can allow for entertainment and recreation.
Don’t bind yourself by making this figure too low. You should always allow some extra money for family fun like an anniversary dinner party or unexpected expenses like a new tire. Subtract this from your net margin. What’s left is excess money.
Here’s a sample family budget:
Monthly Net Income:…………………3,000
Monthly Installment Debt:……………-1,100
Fixed Expenses:………………………..-900
Net Margin:………………………………..2,000
Essentials, Recreation:…………….-1,100
Excess Funds:……………………………900
Now you can budget how you will handle the excess funds.
In this example, the family budget shows an excess of $900 per month.
Step Five: Excess Funds
Extra money can be used in one of three different categories or a combination:
Savings or investing
Applying it toward debt
Obviously once you pay your bills, the choice is yours but a balanced approach can be most successful. You probably don’t want to spend it all or save it all or pay off debt with it all.
What should be the priorities with excess funds?
Paying off high interest credit cards, especially any debt with a rate over 15% annually should be at the top of the list.
The good news is that as you eliminate debt your excess funds will increase and you will get to make new decisions about what to do with excess funds. Once high interest debt is paid off, the next priority can be saving. The more you have saved or invested, the more money you can be comfortable spending each month on your wish list. Is it a flat screen TV or some new landscaping?
Review of Priorities for Excess Funds:
High interest debt
Savings or investing
Tips for Creating a Family Budget:
Budgeting is not as overwhelming once all of your information is on hand, organized and recorded.
Just be careful to leave yourself some breathing room and don’t set yourself up for failure by budgeting too little for spending or too much for savings or investments. Like a diet or exercise plan, if you choose reasonable numbers you’ll be more likely to stick to your plan.