Creating a Family Budget
Creating a Family Budget
Saving money may feel like an enormous task at times. We’ve all been there, juggling the many aspects of our financial lives, and sometimes it feels like things aren’t working for us. Solution – make a family budget!
Simplify the family budget process with these 4 steps!
- Add Up your Family Income – Add up your monthly take home pay and add any other person contributing to household bills. Be sure to add both reliable fixed income and any extra earnings such as that rental income from Airbnb.
- List Your Expenses - Make a list of all household expenses. Some of these will be “fixed” (the amount never changes), and some expenses will be “variable” (the bill will fluctuate based upon underlying factors like water usage). Examples of family expenses include house payment, insurance, car loans, student loans, electric bill, cell phone bill, Wi-Fi bill, water bill, garbage bill, etc. To create an honest family budget, list any extra that you’d rather not go without such as dinners out or trips to the coffee shop. TIP: Access your TruBank online account to review the last 3 months of your bank statements to help identify and review your expenses.
- Calculate your Net Income – By subtracting your monthly costs from your income, you’ve calculate your net income. Is there any money left over? If so, plan how you will use these funds. It may be best to put towards savings or work on paying off any debt. If it is negative, go back to your expenses and rethink about what you could eliminate or reduce spending. It is important to be realistic about spending habits.
- Continuously Review and Streamline – Now that you have a clear overview of your income, spending, and remaining money, it’s time to set your budget. You may want to review what costs can be cut to optimize your savings goal. We’ve all thought “there is no way I can make this work!” but we’ve all been there. Remember to review the last three months of spending and see if you spot a consistently overspent area. Think about reallocating funds such as no coffee on days you go to the gym because your brain is already stimulated from exercise.
Something to think about is the 50/30/20 Rule. This rule means that all your “needs” (house, bills, etc.) should equal 50% of your income, all of your “wants” should be 30% of your income (this would include vacations, dinner & a movie, upgrading to the latest phone, etc.) and your savings should be 20% of your income. Your savings can be in the form of money in a bank savings account, additional contribution to your retirement account, or investing it in stocks, bonds, or mutual funds.
With technology at our fingertips, creating a family budget with digital tools is quicker and easier than ever. The Economic Policy Institute has an online family budgeting tool with cost estimates given based upon US economics across 10 family type scenarios. Even better, check out free apps that help track and graph your family budget. Money Manager Expense & Budget is a popular budgeting app for both iPhone and Android.
The real results will occur as your stay committed and focused upon your goals. Continuously check your spending habits and make small adjustments. Budgeting is a learning process, and we all have mistakes. Use those experiences as opportunities to grow and fine-tune your budgeting skills.
Don’t forget about us – TruBank! We can help you setup automatic transfers from one account to another which is perfect if you calculated a specific savings amount each month. Talking about finances can be intimidating but let TruBank help!