Are you looking for ways your family can save money, but you aren’t sure How To Start A Family Budget? It can seem complicated and overwhelming at first: how do you categorize everything? What about expenses that change or aren’t monthly? Get rid of the starting stress with these practical tips.
How To Start A Family Budget
The best thing to do is take a step back and look at some practical first steps to get a basic framework for your family budget. Here are some tips to get you started.
Estimates and Actuals, not Ideals
Remember that your budget is a tool, not a dream machine. Goals are important, but a family budget should first focus on the numbers you’re dealing with. That’s the basic first step. Once you have a grasp on that, you can begin a bit more idealizing, such as saving for vacations, desired items, etc.
Start with Your Net Income
First, figure out your net income for each month. This means your income minus taxes, insurance, 401K deductions, and so forth. If you are self-employed, subtract estimated taxes, insurance costs, retirement account savings, etc. At this point, you just need numbers.
Keep Expenses General
Next, figure out your monthly expenses. If they vary, figure out an average by looking at the last 12 months worth of expenses. For instance, total up your last 12 months of electric bills and divide them by 12. That will give you a great estimate to budget each month for electricity. Alternatively, you could take the average, add $20 and create a bit of a cushion.
It’s a good idea to keep your categories as general as possible while still preserving clarity. Otherwise, you might get confused or overwhelmed by all the “hair splitting.”
For example, instead of having “food, paper products, drug items, etc.” as categories, you can lump all those expenses under “groceries.” Items like “pet supplies” can be their own category, but you might want to include vet bills in that category.
Here are some suggestions for categories:
- Charitable giving
- Paying off existing debt
- Home (mortgage, rent, property tax, insurance, repairs, etc.)
- Health Care
- Birthday and Christmas gifts
- Cushion (this is money set aside to offset surprises, mistakes, or unexpected expenditures)
- Personal (eating out, hair appointments, etc.)
Stop and Look
At this point, stop and take a look at what you’ve got so far. Are your expenses greater than your income? It’s time to cut back significantly, or find another source of income (or both).
So far, you have two columns – income and estimated expenses. Now you need to add another column: actual expenses. Keep track of the real numbers each week over the next month and see how much/if they differ.
Pro Tip: Staying organized about your daily schedule, to do list, and more is also an important part of teaching yourself to stay on budget. It’s all connected! Check out How To Start Each Month Organized and On Track
Once you’ve made notes for the first steps on How To Start A Family Budget – it’s time for the next level: narrow down your expenses and get serious about amounts.
Grab your copy of our Family Budget Worksheet to put your plan into action each month: