How to Set a Family Budget
From the moment they’re born, from the diapers and extracurriculars to college tuition and everything in between — kids are expensive!
In fact, each one will probably cost you upwards of $14,000 a year, according to the U.S. Department of Agriculture.
But one of the best ways you can build a strong financial foundation for your growing family is by creating a budget.
A family budget can help you get a clear picture of exactly how much money is coming in, and where it’s going out. Here are some tips to get you started:
1. Define your goals
Remember, when coming up with your family budget, communication among family members is key. Define clear goals for your financial health and make sure you’re on the same page when you get started. Prioritize the things that are important to your family and identify other areas where you can trim the fat.
Related: Eating Well on a Budget
2. Set up your budget
Whether you prefer the old school method of pen and paper, the convenience of a spreadsheet, or all the bells and whistles of apps like Mint or EveryDollar — figure out what works for you and any family members who will be involved in the monthly tracking — and do it.
3. Involve your kids
Just like we teach our kids to eat their veggies and brush their teeth — it’s never too early to start teaching them about financial health. Help them learn the value of a dollar by letting them contribute to the household chores for cash. All of a sudden, those important lessons on saving and spending start to carry a little more weight when it’s their wallet that takes the hit!
4. List your income
Tally up all streams of income you can count on coming in each month. Depending on your situation, you may have more than just your job wages, so be sure to include things like alimony, regular side jobs, or rent from investment properties.
5. Add up your expenses
Write down any fixed monthly expenses you have like mortgage/rent, property taxes, or car payments. Then look at your variable monthly expenses like heating/electric bills, groceries, and credit cards, and estimate the maximum amount you’d expect to spend in a month. Use your bank and credit card statements for a broader picture of what you’re spending each month and break down your family budget within each category.
6. Figure out your net income
This is the amount of money you have leftover each month after all your bills are paid. If paying off debt is your goal, the amount of money you have after subtracting your expenses from your monthly income is what you would be able to put towards it.
7. Track and evaluate your spending
Compare your actual spending to what you set in your family budget to see if you are making choices that will help you reach your financial goals. If you’ve gone over your budget, doing this will help you correct the mistake for next month or identify areas where you need to adjust for additional spending. Also, by dividing your expenses into “wants” and “needs,” you should be able to eliminate some luxuries, no matter how small, to save more money.