Running a household is no easy chore, and it’s even more difficult if you’re in a financial pinch. That’s why you should consider creating a family budget. Investing a few hours of time now in planning how you spend and save your money could lead to greater rewards— as in, more money and less stress—in the future.
Ready to tackle your household budget problems? Follow these seven easy steps for creating your family’s monthly budget.
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Establish a goal. Ask yourself what you want to get out of making a family budget. Is it to create peace of mind? Pay your bills on time and have money left over at the end of the month? Improve your credit score and get out of debt? Or are you saving for a big purchase? Once you decide on your goal, write it down so you can remind yourself why it’s worth the effort to stick to your budget.
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Choose a digital budgeting tool. Even if you’re not particularly tech-savvy, it pays to either download online budgeting software to your computer or to use a budgeting app on your phone. Digital budgeting tools are intuitive, easy to use, help reduce errors and are also often available for free or for a reasonable fee.
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Gather your financial information. In order to create a household budget, you need to know exactly what your monthly earnings and expenses are. This includes pay stubs, bank statements, bills and receipts. In addition to reviewing paper records, remember to look up your account information online, including electronic billing and automatic bill pay.
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Organize into categories. The next step is to figure out where your money is going and why. First, separate your expenses into the following categories:
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Utilities — rent, electricity, phone, etc.
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Discretionary spending — dining out, entertainment, shopping for gifts
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Secured debt — mortgage, auto loan
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Unsecured debt — credit cards, student loans, medical bills
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Calculate the information. If you’re feeling old school, you could put all the information you’ve gathered so far into a written ledger or type it into Excel. But you may want to try digital budgeting tools that will not only calculate your budget but also make suggestions on how to improve your spending habits. Simply load your information into the software or app of your choice and let it work its magic. Then watch it create a household budget personalized just for you.
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Look for ways to decrease spending. Take a look at your discretionary expenses and come up with ways to spend less. For example, instead of dining out for lunch, consider preparing food at home and bringing it with you to work. When shopping, try to use coupons or wait for items to go on sale instead of paying full price. You can also look for ways to pay your debts off more quickly.
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Review your budget monthly. Believe it or not, creating a family budget isn’t a “one-and-done” deal. You need to update your income and expense information at least monthly to monitor your progress and look for ways to continue to save. But if you’ve already completed the previous six steps, the hardest part is over. Think of this monthly budget maintenance as a time to reflect on what you’ve accomplished, one step at a time.