Family budget: How to manage family finances

One of the biggest concerns that arise at home is monthly family expenses, especially when they are high and interfere with the family’s stability and quality of life.

If you are finding it difficult to meet your family’s needs, are unsure what your money is spent on, or have limited income and savings, then it is time for you to consider creating a family budget and make it a financial habit.

A family budget

A family budget is a financial management document that allows you to control and record all income and expenses generated at home in an organized way. A budget will help you to identify all your expenses, including the monthly rent, weekly grocery shop, tuition fees, car insurance, clothes for the family, and any other type of money outflow.

Why is it important?

Practically, the benefit of a family budget is having a clear breakdown of your income and all your expenses. By keeping a record of all the inflows and outflows of money, you will be able to make purchasing decisions that are more appropriate to your economic situation.

In addition, it will be easier to differentiate between necessary payments and those that could be reduced or even eliminated from the monthly expenses. In this way, you can start with family savings to help you meet future goals such as saving for a family trip abroad, buying a new car, paying off your debts, as well as being prepared for any unforeseen situation that may arise. Keep in mind that if you face an emergency, you can rely on a resource like Family Money. The family money magazine and website are a great source of information for people in the UK that want to optimize their finances, save money on insurances and bills, and also apply for a low interest credit. The website is written by experts in the field and is absolutely free for  readers. Check out the personal finance section of this website before you take any credit from your bank or private lenders.  You worked hard for your money, don’t lose it because of technicalities.

Appropriate management of the family budget will give way to greater stability and tranquility at home, and eliminate worries about future financial problems. Identifying what products and services you spend on will help you clarify what you can afford and thus avoid debts.

A family budget can also eliminate conflict in the family since a common cause of conflict is financial uncertainty or instability.

How to make a family budget

You can make your family budget in traditional format (paper and pen) or digital format (create an Excel file), according to your preference. Once you have this on hand, the first thing to do is divide all the family’s monthly income and expenses into two main categories, from necessary and recurring to occasional. To understand this better, we will define these categories in more detail:

– Income: Enter all the economic income available to the family unit here. This includes payroll payments, commissions, bonuses, income from real estate rental, subsidies, pensions, bank deposits, investment accounts, awards or monetary rewards, including money in your wallet.

– Expenses: This section includes each of the money outflows, classified into fixed, variable and unforeseen expenses.

– Fixed: They are the necessary expenses that occur regularly (weekly, monthly, bimonthly, semi-annually, annually) and cannot be eliminated or reduced. They are generally mandatory payments that can cause personal problems if you do not pay them on time, such as rent, mortgage, electricity, telephone, water, gas, insurance and tuition, among others.

– Variables: These are the expenses that can be reduced or, in some cases, eliminated, such as transportation, clothing, outings to restaurants, family fun, monthly payments for sports centers, classes or gyms, and more.

– Unforeseen: These are expenses that appear unexpectedly or by surprise, for example, the repair of the car or the refrigerator.

Make sure to always enter accurate and precise values into your budget since it is a true reflection of your financial situation. Don’t omit or alter any data.

Categorize income and expenses

After dividing your budget into the two main categories, you should begin to classify the income and expenses in the form of a list, especially in the expenses section, where you will have to write down each of the costs you had. To better guide you on which categories you should include in your budget, make a list of the expenses you generated the previous month.

The categories will depend on how detailed you want your budget to be; the more detailed it is, the more accurate results you will get.

Methods for controlling expenses

As mentioned above, to make your family budget you can use a digital tool in order to have greater control of your finances each month. In addition, the advantage of using these tools is that the program includes downloadable templates already configured to adjust your budget according to your needs.

The post Family budget: How to manage family finances appeared first on Tweak Your Biz.