Friday, April 27, 2012

Frugal Friday: Budgeting

Keeping track of family finances is an important part of creating and maintaining a healthy family. A budget helps you plan and evaluate your spending. Through budgeting, your family can balance your income with your expenditures and continue to spend less than you earn.

Here are some ideas to help your family as you create a budget:
  1. Have a planned budget as well as an account of your actual income and spending. This will help you to evaluate how close you are coming to your plan and make adjustments as needed.
  2. If possible, set aside a certain percentage of your income to save every month, even if it's just a little. This money will grow over time and will give your family more financial freedom in the future. We've found that the best way to do this is to take the money out before spending occurs (right after you receive it). That way there's no chance that you'll "accidentally" spend it.
  3. List your sources of income. Some examples are:
    • Wages
    • Salaries
    • Tips
    • Tax Refunds
    • Interest payments
    • Gifts
  4. List your expenditures. Create categories for spending that apply to your family. Some examples are:
    • Food 
    • Mortgage or Rent 
    • Utilities 
    • Transportation 
    • Debt Payments 
    • Insurance 
    • Medical 
    • Clothing 
    • Entertainment 
    • Personal Spending 
    • Charity 
    • Financial Goals 
In our family we do a monthly budget, but we evaluate and track our spending once a week at a specified time (for us that's Monday night). We use a software program that we bought that lets us input our expenses and helps us keep track of our budget. I highly recommend using a budgeting software. It really saves time! There are a lot of different programs available for this and I don't know that any work better than any other. But, even with the software, we plan on spending about one to two hours doing the budget every week. Which may seem like quite a time investment in a busy schedule, but we've found that it's worth it! During this time we input our expenditures (from receipts we have saved), pay bills, and set and evaluate financial goals. Financial goals are an important because they give you something to work towards, making it easier to stick to a budget. Some examples of financial goals are:

    • Paying off a mortgage or other debt
    • Saving for a vehicle
    • A family vacation
    • An investment
It's important for both partners to be involved in the budgeting process; it really helps to create harmony in the home when you're on the same page financially. As the children get older, they can be involved in many ways as well. One example would be including them in the planning and saving for a family vacation. 

I'm interested in your thoughts on this topic. How is your family doing with their budget? What works and what doesn't? 

Linked to: Frugal Friday

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