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Creating and Maintaining a Family Budget
Creating and Maintaining a Family Budget

By Lyn Bell

Creating a family budget is the first step to avoiding financial trouble. It is particularly important now as money becomes tight for many families. We all need to know where our money is going so that we can keep on top of things and take appropriate action when needed. It will give you more control over your destination and your personal finances.

Firstly make a list of all of your monthly income as well as a list of your monthly expenses. With regard to income, list all sources including part time work, maintenance, child support, regular interest and dividends and so on.

When calculating expenses make sure you include fixed expenses such as home loan, rates, hire purchase and loan payments as well as essential variables such as food, transportation and utilities. You should also include something for entertainment, and don�t forget an allowance for clothing.

To gain an accurate picture of your expenses save your receipts and make time to sit down and record these expenses. You may be surprised at what you actually do spend.

Now that you have all of these details written down your next step is to find out if your income actually covers all of your expenses. If the answer is no, then some of your expenses need to be reduced.

So how do you adjust your expenses to allow for this shortfall?

� For a small deficit it may mean reducing expenses such as entertainment or perhaps your cell phone plan.

� However, if the deficit is large, you may need to take more drastic action, especially if you are unable to increase your income. This action could entail downsizing your vehicle or your accommodation.

If your income covers all of your expenses but you have no surplus you may still want to take a look at your spending habits to allow for savings. This extra money can come in handy for things such as and overseas trip or funds for your children�s education.

What has been described is about creating a basic family budget. Creating a family budget will help you to gain control of the family finances but there are other categories to include in your budget that will help you get further ahead.

� An emergency fund will ensure there is money available to cover unforeseen expense -- such as emergency travel to visit a sick family member. This will avoid the need to use your credit card which is usually a sure way of blowing your budget.
� Creating a disciplined strategy to reduce debt.

Your family budget needs to be monitored on a regular basis to make sure that you are keeping on track. This is the time to make changes as necessary.

Without a disciplined approach to spending, it is almost impossible to make headway in the reduction of debt. If implemented correctly, a budget will allow you to simultaneously meet your expenses, place money into savings, and pay back debt. It is for these reasons that creating and maintaining a family budget are so important. It creates the framework to getting ahead financially.
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