If you’re tight on money or you’re just looking for ways to save, you’re going to want to create a family budget if you haven’t done so already. If you don’t know where to start, I’m going to give you some tips on how you can prepare a budget and make it work for you month after month.
Why do you need a family budget?
It’s going to show you the cash coming in and going out. This gives you a great idea on where you’re spending your money. Are you spending too much on food? entertainment?
It also allows you to see how much you can save. Saving is key and experts say that if you can save at least 10% of your take home pay each and every month, you’ll be better off than a lot of us out there.
Now, let’s get onto the point on how we can create a budget step by step:
STEP 1 - Let’s get together how much money we are bringing in each and every month. You’ll want to include your take home pay after taxes as well as any other money. Do you have rental properties? Interest from bank accounts etc? Mark down every dollar that flows into your pocket monthly.
STEP 2 – Now, let’s look at all of our expenses for the month. If you don’t know what they are, you may want to refer to the bills from last month. Let’s write down every bill we have to pay each month. These bills are going to include a mortgage / rent, utilities, taxes, car payments, insurance, TV, health insurance, etc. Write this down and how much you pay for each one. At the end, total them up.
STEP 3 - Now, let’s take your take home pay and the expenses and subtract. Let’s hope that you’re still in the positive range because if you’re not, we are in trouble. For example, if we bring home $3,000 and spend $1,800 each month, we have a different of $1,200.
STEP 4 -Take the difference and multiply it by 10%. Now, we need to save and I don’t care what you save. If you’re in the positive after all expenses, let’s multiply the total by 10% and put it either in a high yield money market account, stocks, CDs, etc. It’s all up to you. If we take the example above, we will save $120 a month which equates to $1,200 a year. Start adding interest to this over years to come and you’ll have a nice six figure balance when you retire.
STEP 5 - For now on, I want you to go out there and buy a notebook for your spending. No matter what you buy big or small, write down this in your notebook. Now, this is what I do. Let’s use that example again above and this is what our balance will look like so far:
- Take home pay: $3,000
- Expenses for month: $1,800
- Difference x 10%: $120
- Leftover cash for groceries, etc: $1,080
Now, with our notebook, we are going to put $1,080 on the top of our sheet. Let’s say we spend $80 at the electronic store. We will write this on our notepad and subtract it from $1,080. We now have $1,000. Do you see where I’m going? This will give you a better idea on how much you have to spend each and every month. Make sure you carry this notebook with your everywhere and make sure you write down each expense.
By now, let’s hope you have a better understanding on how to create a family budget. As long as you’re disciplined and you spend less than what you make, you shouldn’t have a problem at all with saving money and attacking your debts. Start your budget today because it’s never too late!
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