How to set a budget for your family and stick to it

January 31st, 2011 Todd Means

Managing money isn’t always easy – especially when you have a family and it doesn’t seem like there’s enough money to go around. The mortgage, bills, groceries, insurances payments and gas can all make it seem like your hard-earned money has vanished into thin air.

That’s where a family budget can be a lifesaver.

A budget allows you to better see where your money is going –and where it needs to go. By controlling your family spending you will be able to save more effectively for vacations, retirement and your children’s education.

When setting up your household budget, you should keep the following things in mind:

  • Analyze your three most recent bank statements to determine what you have been spending money on. Try to group together expenditures into overarching categories, such as groceries, gas, entertainment, utilities, child care, etc.
  • Determine what your monthly fixed living expenses are. Fixed living expenses include rent or mortgage, utilities, phone, car payments, insurance and any loan payments you may have. These are expenditures that will remain the same on a month-to-month basis.
  • Do a similar analysis for your income. Take into account your paychecks, bonuses, interest income and tax refunds.
  • Compare total income to total expenses. The most important thing to keep in mind when you’re developing a budget is to make sure your income is greater than your expenses. The more you can lower expenses the more you’ll be able to save.
  • Evaluate your expenses and develop a budget for each category.
  • Set up a savings plan, such as a certificate of deposit, IRA or savings account, and begin making regular deposits.
  • Develop a system to track your monthly expenses. This will help you evaluate if your plan is working and allow you to fine-tune it, if needed. There are many tools available online for these purposes, both free and for a fee.
  • Identify opportunities to save and develop a plan to cut back spending in specific categories.

Once you’ve established a family budget, don’t allow yourself to slack off. Implement strategies that will help you stick to the budget. Some of our favorites include:

  • When you’re making a purchase, stop yourself and determine whether it’s a need or a want. Analyzing your purchases in this manner will help you cut down on unnecessary spending.
  • Instead of using a credit or debit card when you’re purchasing groceries (or other items within a category) force yourself to pay with cash instead. This will force you to stick to your monthly budget since you won’t be able to pay for additional items once you reach your limit.
  • Establish a purchase limit with your partner for discretionary expenses at which a joint decision has to be made before the item is purchased. For example, if your purchase limit is $200, you would have to consult with your partner on any purchase above $200. This will help curb impulse spending and force you to consciously determine whether the item is truly a need versus a want.

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Todd Means

About the author

Todd Means is a Vice President at MidWestOne Bank. He works in the retail department, specializing in checking and savings accounts, consumer loans, auto loans and home equity loans.

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