5 things to consider when building your family’s first budget

Being financially responsible is a tall order in today’s consumer-driven society. It becomes even more difficult the moment you have loved ones who rely on your income to survive. There’s no better way to manage your family’s funds than with a good ol’ fashioned budget.

There are numerous ways to approach creating your first family budget, but nothing seems to beat the tried-and-true method of writing or typing a physical document for the whole family to review together. This process requires everyone’s input even if you’re not bringing any money to the table; keep in mind that your family’s minute spending habits are equally important as the breadwinner’s income.

The steps below are applicable for essentially every type of household budget. Regardless of your income or lifestyle, creating a budget is a definite way for everyone to understand where the money goes and how to adjust your spending moving forward.

Establishing your goals

Prior to creating a worthwhile budget, you and your family must agree on the magnitude of your goals. It could be saving for a vacation, college tuition, debt management, retirement or merely a more financially sound lifestyle. Your budget might even have the potential to meet individual goals for everyone in the family.

Being passionate about your plan is the only way to truly make your budget work. Without having a solid understanding and excitement for why you’re budgeting, family members tend to have the impulse to splurge on unimportant expenses. A single individual who fails to hop onboard can cause the family budget to bomb.

A surefire way to gain motivation and never lose sight of your goals is to write or print them in physical form. There’s something to be said about having a tangible document to come back to as an instant reminder to spend wisely for you and your family.

Calculating household income

It’s easy to calculate an annual salary, but there’s always the potential for more income throughout the year. Petty cash from selling random items or receiving cash gifts can turn into significant savings, especially for your kids. Don’t forget to include work bonuses, rental income or child support if applicable.

Once you’ve established a household income amount in detail, you can now determine the lifeline of your budget and saving goals. (Source)

Short-term goals are oftentimes household items or new work clothes. Medium-term goals can be a new laptop or that trip to Europe you’ve been talking about. Long-term goals are typical of a bit more substance such as a down payment on a house, retirement or teaching your kids financial accountability.

Prioritizing debt

Perhaps the most financially irresponsible evaluation for you and your family is saving for additional assets while you’re in debt. With credit cards, home loans, student loans and so forth, accumulating debt is easier than ever.

As the breadwinner of your family, it’s important to discuss the dangers of debt and why taking care of it should be a priority before any family vacation. In fact, when writing out your physical budget plan, your debt payoff goals should be first on the list. By getting everyone involved, you can conquer your debt and move on to the fun savings sooner.

Determining needs vs. wants

Spending money is, unfortunately, a mandatory factor in an honest life. Basic resources to survive cost money, so they must come first when distinguishing your needs and your wants. Food, water, shelter, transportation and necessary clothing should be at the top of the list on your budget.

Determine a monthly cost for all essential expenses and budget accordingly. If your budget allows it, factor in the additional wants after the fact but don’t lose sight of your ultimate goals.

Documenting expenses and additional income

Most family members tend to have their own bank account aside from the commonly joined parental account. That said, keeping tabs on all family spending is impossible unless it is openly presented and documented at the table. Receipts and bank statements are perhaps the most foolproof method for tracking expenses.

Additionally, there is always potential for unexpected additional income after you’ve created your budget. For the most precise financial plan possible, record all earnings while sticking to your initial budget, and you will likely reach your goals sooner than expected.

While budgeting goals and incomes differ from household to household, the fundamentals of saving remain constant. Keep these tips in mind when assessing your family’s financial plan to achieve the fruitful lives you deserve.

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DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.