The first step to building and living by a realistic budget is to know your current situation thoroughly. Are you a single or double income. If double, and you can swing it, consider creating your budget based on one income. Use the second income for savings, investing for your future and emergencies only. Remember, you may be setting this up alone at first, but eventually everyone will be on board.
Gather Your Debits and Credits
Basically, a budget ensures that you are spending no more than you make. In order to create a budget you need to know what money is coming in and going out each month. The trick is to account for everything, but leave yourself a bit of flexibility for the contingencies. This will help you build up a bit of an emergency fund.
To help you get organized you will need budget worksheets. Go to any site and print free samples or download to your desktop as a PDF and print out whenever you like. These pre-printed worksheets save you the hassle of listing and remembering every little item, and will keep you honest with the list.
They will help keep track of every family member’s spending habits. Give the teenagers their own responsibility to make them feel important. Eventually, they will carry this training to college. They may surprise you with their insights.
Gather bank statements, receipts, and any financial records for two months. Don’t worry about amounts, just get all static expenditures in order. This includes the rent or mortgage, taxes, telephones and internet, loans and credit/debit card payments, satellite or cable, utilities, subscriptions and non-essentials, entertainment, vehicles and insurances and monthly health costs. Get everyone in the habit of asking for receipts for everything. Staple these to the monthly worksheet. This will cut down on impulse buying when you actually have to think about it. You will be surprised at how much you spend in certain areas. It is these areas where you can begin to save. Keep at it until what you spend is less than, or equal to, your income.
For incoming, list the monthly salary you are working with; bonuses for that month; any benefits (your ex, child support, tax credits, etc.); additional cash payments from family or friends; rental houses or property. If your check is a variable amount, add several months together and divide by the number of months. If you are paid weekly, multiply your weekly pay by 52 weeks and divide by 12 to get your monthly amount. This will be easier on the spread sheet since most people budget monthly and it will keep the amount consistent.
How to Stay Grounded
Once you and your family fully understand incoming and outgoing, you can start to play with your budget to make life easier. With a family it is very easy to lose track of the killer “frittering” away. By reeling in everyone’s spending you will be amazed how you can live within your means while enjoying family activities.
Consider direct debits for all the regular payments. This will keep you mindful of the account balance, you will be eligible for a discount and you won’t have to pay penalties or fret over a large, late payment. If you are carrying a large outstanding credit/debit card balance, you may want to consider consolidation. You maintain one monthly consistent payment at a very low interest rate. Destroy all the consolidated cards, keep one handy for emergencies and credibility when you travel.
Keep track of your spending for two months. Keep the family in control of impulse spending. Ask yourselves if you really need it. You will be shocked at the silly non-essentials exploding your budget through the roof.
If you can’t remember what you spend in a day, always ask for a receipt. Collect them and track what your family spends. It will become habit and if the amount of paper doesn’t scare you, then the amount you spend will.
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