How to: Create a Family Budget
A family budget is the best way to track your money and make sure that your finances are organized and healthy. It takes some work and self-control but it will secure your family’s financial future. Money is a common cause of marital stress and divorce, so working together on your finances will help keep your family happy.
So how do you get started? Here are the steps that we have taken and recommend because they have worked for us. Please keep in mind that I am not a financial expert.
1. Learn about money
We all learn in school that four quarters make a dollar but money gets more complicated when you’re an adult. We have to think about life insurance, retirement, savings, interest, credit card debt, student loans, expenses and so on. So the first thing that will motivate you is to learn. There are several different popular authors to choose from – it depends on your personality and goals. Here are 3 I am familiar with.
- Suze Orman is incredibly inspiring and personable. She also places great value on family. She encourages women to take control of their finances and really knows what she is talking about. She has many best sellers but The 9 Steps to Financial Freedom is a good place to start.
- David Bach is really practical and has books for all situations. He is known for The Automatic Millionare where you “Pay Yourself First” and put 10-15% of your gross income in savings automatically each month. If you have a significant other – Smart Couples Finish Rich is a good one to read together.
- Dave Ramsey is pretty hardcore! My husband and I enjoy his radio show. He is known for The Seven Baby Steps which includes the famous Debt Snowball. He can get you where you want to be. Check out The Total Money Makeover for his advice.
2. Track your expenses
Many people have no clue what they spend on food each month. Bills are paid automatically with little thought put into it. Before you can start a budget, you need to know where your money is going. So for at least a month, write it down. Gather together your bills and receipts and figure out where all your hard earned money is going.
3. Create a family budget
It is best for everyone in the family to sit down to create this budget together. If you have children who get an allowance, this is a good time for them to create a mini-budget. It is also important that everyone is aware of where the money is going and what the new money goals will be. Maybe everyone could work toward cutting down the electric bill and getting some money into a vacation account!
We use Mint.com. Their slogan is “The best free way to manage your money” and I think they are right. I tried using Manilla when they first came out but it didn’t work for me because they weren’t set up with so many of my accounts. That may have changed.
You can connect Mint to all your accounts – credit cards, checking and savings accounts, retirement, investments and so on. You can plan a budget, see your trends, and get tips on how to save. Each time a transaction goes through on your credit or debit card, it is automatically categorized although sometimes you need to do it manually. Click on the photo below to see a sample budget.
When your budget is on track, you will see green. When it is yellow, you need to start being careful. When it is red, you are over budget and need to stop spending. The goal is not to get to red!
After seeing where your money is going, you can plot your budget. Decide how much you want to spend on groceries, entertainment, etc. Input your fixed expenses. You definitely want to leave room for an emergency fund and savings. Try and challenge yourselves to spend less and save more. Having a budget will help you really think before you spend and stop money from falling through the cracks.
4. Maintain Your Budget
I use the Mint app on my iPhone to check the budget almost every day. We are always thinking about our money and coming up with new goals, such as reducing the electric bill by turning the thermostat down or calling the cell phone company to negotiate the monthly rate. I create a meal plan and price match at the grocery store to reduce our food budget since it is our biggest expense. Meet together at the end of the month and talk about how things went and how you can improve. In the first few months, you’ll need to tweak the budget.
5. Enjoy financial freedom
When your money is organized and you’re on track to pay off debt and save – you feel great. Stress is reduced and you know your future will be better. Have small rewards so that you can also enjoy your money. Keep reading and learning and email me at [email protected] to tell me how creating a family budget has helped you!