Budget Basics: How to make a family budget in 6 easy steps
Do you struggle with how to make a family budget work and stick to it?
Do you struggle to set a budget to make ends meet? Do you struggle with following the same budget week after week? Here are some tips and ideas on how to make a family budget work for you in six easy steps.
The family budget
You’ll be surprised at just how many people actually don’t have a family budget. Or have a budget and don’t actually follow it each week.
It is important to know how to make a family budget work and stick to it if you want to reach your financial goals in life. A family budget is needed if you want to live within your means, pay your bills and debts if you have any, and still have fun.
If you need some pointers on how to make a family budget work for you, then read on.
Do you need budget advice support
There are lots of places and community groups that can offer free budget advice. If you are feeling overwhelmed by your finances get some support. Don’t be afraid to ask for help. Whether it be a family member, a friend, or a community group who offers budget advice. They often may know of a better way of setting up your finances to make it easier for you and can teach you how to make a family budget work.
I have heard of some people in some situations who just can’t manage their money. If you are one of these people and reading this, my advice to you is to google for your nearest budget advice centre. They are usually very understanding, nice and friendly and offer to help you set things up and give you free advice.
Here is a list of just a few of the free budget services available in New Zealand. They have loads of tools and resources available that you can download including budget worksheets.
- The New Zealand Federation of Family Budgeting Services
- Budgeting – Citizens Advice Bureau
- Budgeting Advice | The Salvation Army
- Get Sorted
A simple step by step guide on how to make a family budget in 6 easy steps
Here is a step by step guide on how to make a family budget. But first, a couple of tips:
Tip: If you get paid weekly, list everything weekly. If you get paid fortnightly, list everything fortnightly.
Another tip: It is best to do this in an Excel Spreadsheet if you have access to a computer. If you are computer savvy, you can set up formulas so when you enter figures it automatically calculates your totals as you go.
Otherwise, a pen, paper and calculator do the same job.
Step One: List all of your income
Write down what your regular income is. This should include all regular income such as wages, government assistance, any board or rent you might receive. I tend to leave any irregular income out. For example tax credits, or sales from a few crafts you might make. Or the odd casual job you might be able to pick up. Let’s just work with REGULAR income only.
Step Two: List all of your expenses
Make a list of all of your expenses. Most importantly – Don’t leave any expenses out. If you are paid weekly, work out what each expense is on a weekly basis, if you are paid fortnightly, then work out all of your expenses on a fortnightly basis.
Include all your weekly, monthly and annual expenses.
Don’t under budget either! If possible add a few dollars or round it up. Personally, like to work with $5 as my minimum denominator. For example, if my average power bill was $210 per month I would multiply it by 12 (months) then divide it by 52 (weeks) = $48.46 per week. For my weekly budget, I would round this up to $50 per week.
Step Three: Divide your expense
Split your expenses into two categories: Fixed and other
Fixed expenses are things such as Rent or mortgage payments, Power, Petrol, Food, Insurances, debt repayments etc. The things that you have to pay every week, fortnight or month regardless and these figures don’t tend to change.
Other expenses are more variable items like school fees, sanity, birthday/Christmas allowance, savings etc.
Step Four: Work the budget
Work your budget so your income matches your Expenses + Savings (if any). Some expenses like the ones you have listed under “Other” can be amended if needed, play with them a little so that the total income matches your expenses and savings together.
For example: If you need to shave $5 per week off Christmas money and birthday money to make your budget work, then you can. Just make sure that you don’t overspend when it comes to the time.
Step Five: How to divvy up your income
So you have set your budget so that your income is equal to your total expenses, including any savings.
This next process can be a little tricky, but very important. You now need to decide on how your money will be divided while keeping to the budget that you have set.
For example: A weekly pay day using the “Only withdraw what you need” system could look like this:
- Budgeting Basics – The withdraw ONLY what you need system
- Ways to save money on a tight budget – See how I shaved 15% off our already tight budget
- Paying off debt fast – Using the Pay It Forward system
Step Six: Set your goal and stick to your budget
Once you have figured out a budget that you feel comfortable with, set a goal and stick to it.
For example, your goal could be:
If we stick to this budget, our debts will be paid off in 12 months’ time.
Or if you manage to have some savings, your goal could be something like:
If we stick to this budget, then we will have enough money saved for a family holiday to the tropics!
Stick your budget on the wall, highlight your set goal and follow it every week.
Sounds great right! Sure. But setting your budget is the first step. Sticking to the budget and managing the money every week after that is the next step. It is best to set up automatic payments or direct debits for all of your bills.
What are your basic budgeting tips?
If you have a budget tip or some advice on how to make a family budget work we would love for you to share with our readers in the comments box below.