How to Create a Budget Your Family Will Stick To

If you want to get a handle on your finances, one of the best ways to do that is by creating a budget and then sticking to it. As with so many other things in life, though, creating a budget is much easier than following one.

Here’s how to create a budget that your family will stick to.

Get the Paperwork

The best budgets are as detailed as possible. That’s why it’s important that you gather every piece of financial information you can find. Get bank statements, retirement account statements, brokerage quarterly statements, PayPal statements, and anything else you can find that’s even remotely related to finance.

You’ll use that information to create a few budget spreadsheets that will help you track income and expenses.

Record Your Sources of Income

It won’t be difficult to itemize your primary source of income: it’s your salary. However, you might have additional sources of income as well.

Since you’re developing a household budget, you’ll certainly want to take into account any income from your spouse. Additionally, you might have interest income from a savings account. You could also have income from a brokerage account in the form of bond interest or stock dividends. Also, if you do any odd jobs on the side for income, or work multiple jobs, that’s income that should be accounted for as well.

List Your Expenses

This is where it might get a little difficult. That’s because it’s easy to overlook expenses.

Use your library of financial statements that you accumulated earlier to locate every single one of your expenses. Monthly expenses might be easy to find, but they’re sometimes difficult to account for because they vary from month to month (utility expenses are a great example of that). You might find that there are some expenses that only occur once a year or once a quarter (HOA fees, for example). The important thing is to gather all of your expenses and develop an average for each month.

Total Everything

Now it’s time to add everything up. Start by totaling your monthly income. If it varies from month to month, take an average.

Do the same with your expenses. The idea here is to get an idea of your average monthly expenses.

Now you should have two figures: your monthly income and your monthly expenses. If your monthly income doesn’t exceed your monthly expenses, then you have to do once of two things: generate more income or cut expenses. Of course, you could also do both.

Some expenses are harder to cut than others. For example, if you’re going organic on a budget, you might have to cut expenses elsewhere to ensure that you can always afford organic food.

Also, make sure that your income doesn’t just barely cover your monthly expenses. You should have enough cushion to put some money away into savings or an emergency fund. There will also be surprise expenses that you didn’t account for from time to time. Fortunately, sometimes there is also surprise income.

Creating a budget takes a little bit of effort. Following that budget takes a lot more effort. Make sure you exercise the financial discipline necessary to follow your own guidelines.