Have you been talking about a family budget but aren’t sure where to start? Sometimes it’s good to start with the basics, such as the basic outline for a budget and the categories you want to include. Here are some tips to help you formulate a simple family budget.
The first place to start in the outline of your budget is with your income. There will be some estimating here, of course, but make sure it’s estimation and not dreaming. The income area of your budget is not the place to write down ideals. Simply take a look at your net income over the last three months and estimate an average monthly income. Or you might have income that changes very little month-to-month; it should therefore be pretty easy to figure out your monthly income.
Your next category should be expenses. It’s good to include enough detail to have a grasp on things, but splitting your expenses into dozens of little categories will probably only frustrate you. Try to make your categories fairly general – “entertainment,” for example, is a more general category than “computer games,” “movies,” “cable,” and “DVDs” listed as separate categories. There will probably be more estimation here than in the income category.
As you break down your expenses into understandable categories and numbers, remember that charitable giving or any other outflow of money should be also listed as an expenditure.
Estimation gives way to “real” numbers when you write down your actual expenses during the month. This is the last section of your budget plan. Keep a running tally of your expenses for several months, and then look at where you are.
Some Basic Principles
In budgeting, there are some principles that are considered basic. Here are some of them.
* Distinguish between wants and needs. This can be a hard one, but it’s vital for a budget to function properly. Beware of convincing yourself that a want is a need when it isn’t – you may just be trying to find an excuse to buy the item. Real needs are things like clothes, food, and shelter; but designer clothes, gourmet food, and a palatial dwelling are more like wants!
* Expenses should not exceed income. You may find yourself surprised the first time you do a budget and discover that you actually don’t make enough money to cover your expenses. If you discover this, you need to look carefully at your income section and see where you can increase it, and look just as carefully at the expenses and see where you can make cuts.