Creating a Budget

Creating a family budget is one of the primary key to good financial health. A budget allows you to see a realistic snapshot of your financial responsibility. Whether it is grocery shopping or paying the monthly electric bill, we're faced with family budget decisions all the time. It's always difficult to deal with financial planning matters such as family budgeting.  No matter how people might try to deny it, we make decisions all the time that affect our ability to stay out of debt. The key to success is taking a proactive approach to handling our debts and making informed choices on how and when we spend our money. Unfortunately, for many of us budgets are a reality check that we try to avoid.

No matter how hard you think you can make a budget work, family income must be greater than family expenses. Families that find themselves on the verge of bankruptcy, or in debt, are in that situation are in that situation because they chronically break this simple rule.  If you don't have the right balance, then you can do two things:

1. Increase family income
2. Decrease family expenses

If you start the year or create a family budget that is not balanced then you are only kidding yourself.  Don't plan on hitting the lottery, plan on paying your bills. By taking a close look at your sources of income and where all the money goes each month, you'll generate better ideas on ways you can save money each month.

You can spend money on software or other programs but the easiest and most cost effective way to start a budget is to simply use a spiral notebook. This site has a really nice (and free) budget form that is very simple to use, The first step in creating a solid family budget is listing all your  monthly income. Paychecks should be listed by the net pay and only count funds that you know you are getting. If you have commissions or other income that varies, you will have to go back and look at the last 6-12 months and come up with an average. Remember fudging the numbers will greatly reduce your ability to stay on budget!

Once you have your income complete, start a second page listing the fixed expenses. fixed expenses are items that you are unable to reduce and are the same amount every month. They may include:

• Mortgage payment or rent
• Utilities
• Insurance
• Car payment and  scheduled maintenance.

The third section is your controllable debts. this is the area where you have the most flexibility on your budget to lower lower your expenses. Items to include are things like clothing, food, leisure spending and such.

The more detailed you make your budget, the more accurate it will be and the better you'll be able to track your expenses and find areas to cut.

Don't forget to take a little off the top each month for savings – think about setting up an automatic transfer from your paycheck. Don't count on saving whatever's left over at the end of the month because expenses routinely expand to consume available income. Think of the family budget as your road map to financial independence. Read our article on ways to save money online, savings tips, and saving energy at home to help reduce costs!