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How to Create a Family Budget You Can Stick To

Updated on December 2, 2009
Photo: sciondriver,Flickr
Photo: sciondriver,Flickr

Do you want to know the secret of creating a family budget you can stick to? The secret is to understand what you spend money on right now. If you don’t know where your money goes, you are powerless to take steps to affect that spending. It’s no use creating some arbitrary budget and willing yourself to live within it. Instead, by creating a ‘budget’ of your current spending, you become aware of how you spend money, for better or worse. Armed with this information, you can make changes.

Any time you’re ready is a great time to create a family budget, so if you’re serious, get some paper, pencils, and a container to collect receipts and let’s get budgeting!

Tracking Expenses

Because the secret to creating a workable family budget is to identify your current expenses, you’re going to need a way to track them. While some expenses like rent or a mortgage are fixed, many others vary. You may not know how much you actually spend at the coffee shop until you really look at it. Tracking doesn’t have to be fancy, and it doesn’t have to be high tech.

If you have the ability to categorize your spending electronically through your bank or a personal finance software program, try utilizing this feature. Some people put everything on a credit card and categorize spending at the end of the month. A very effective method is simply to keep all your receipts and log them in a spiral notebook. It sounds tedious, but yields priceless information.

You’ll want to collect spending information for a least a couple of weeks, a couple of months is better. Create some budget line items such as Groceries, Medicine, and Clothing. Along with fixed expenses, this creates your budget.

I used to use Quicken, but when my bank started offering online bill pay, many of it’s features were rendered useless. Now I keep my budget on a very simple Excel spreadsheet, but you can do the same thing on paper.

Using the Budget as a Tool

Starting with the budget of current spending, continue tracking, but also use the budget to decide how and where you can make changes.

If you are spending more than you are bringing in, you need to cut costs. A simple way to do this is to label all expenditures as wants or needs. If it’s a need it gets cut! Repeat until your expenses are under control.

If you have trouble cutting in a certain area, you might consider living on a cash basis for that particular expense. For example, if you find your family is spending $200 a month on dining out and you’d like to cut that by half, put $100 cash in an envelope at the beginning of the month and use that for eating out. Once the money’s gone, it’s gone. No excuses, and no credit cards!

Having a written budget is a key step in improving your family’s financial well-being. It gives you control over your spending and serves as a valuable tool for making changes to the way you use the money you have.


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