Putting together a budget is pretty easy if you're single, your only dependent is a cat and you're willing to eat nothing but grilled cheese for 20 days straight to save up for your only major expense for the year -- a trip to Key West.
But when you're responsible for a unit of people that includes children, budgeting becomes much more complicated. Sure, putting the kids on an all cheese and bread diet for two weeks out of the month might help you save for their college educations. But it won't do much good for their health (or their dispositions). And anyways, how are you going to budget for other needs -- like ballet lessons, karate and Popsicles? And should you really be drinking that morning latte if it's costing your kid her piano lessons?
Face up to your spending habits on the next page.
Make a Diary of Your Expenses
The first step to making a family budget is to get a grasp on where your money is going each month. To do this, keep a detailed log of income and expenses, making sure to include not only the big transactions, like your paycheck and your mortgage, but also small ones, like interest from a savings account and the cost of your morning latte.
Once you've taken a good hard look at how you spend your money, you can put your expenses into two piles -- fixed and discretionary.
- Fixed expenses are costs that you expect to pay each month, like groceries, utilities and your mortgage payment. Depending on how old your children are, these costs could also include diapers, childcare and new clothing for your ever-expanding toddler, for example.
- Discretionary expenses are less predictable and often less necessary. They include things like trips to the movies, beach vacations and taking the kids out for pizza on Friday nights. Families might also put birthday parties, video games and summer camps into this category.
Spend Money on a Math Tutor, Not a Video Game
If you're lucky, your fixed and discretionary expenses add up to less than your income. If you're not so lucky, you'll need to cut some discretionary costs from your budget. And that means thinking about the value of what you're buying for your kids. Rather than giving them frivolous toys, spend money on things that will enrich your children's life experience. For example, choose violin lessons over premium television channels and educational toys over the latest electronic gadget.
And make sure you put away savings. Most financial experts recommend that you have a reserve in the bank equivalent to six months of your gross salary, in case one or both parents were to lose their jobs. It's also important to set savings goals for other things like retirement, vacations, college tuition or a larger home for your growing family.
How to Stay on Budget
Once you've pounded out an effective budget, make sure everyone in the family is committed to following it. You can involve your kids by giving them allowances. How much you pay them in allowance is up to you, but be sure your children know what expenses they are and are not expected to pay.
Managing "fun money" between spouses can be a bit trickier. Many couples choose to have one bank account because it makes managing joint expenses easy. But then things get complicated when the wife wants to spend some of her own money on yoga classes and the husband wants to spend his on golf. For this reason, two individual accounts may seem appealing. But having two accounts is the least efficient way to manage joint expenses.
A good compromise is the three-account method. You'll have a joint account for shared expenses and individual accounts for each spouse's personal spending. No matter how you choose to organize your finances, communication is key to making your budget work. If both parents consult with one another about the family's finances, your budget and your marriage have much greater chances of success.
- Parlapiano, Ellen H. "Mom, I Need Some Money." Family Circle. 2010. (June 12, 2010)http://www.familycircle.com/teen/parenting/discipline/mom-i-need-some-money/;jsessionid=1MS4DSO3OH23ACQCEASCAOQ?page=1
- Coffey, Laura T. "Build a Family Budget That Actually Works." Today. Aug. 6, 2007. (June 12, 2010)http://today.msnbc.msn.com/id/20072930/
- Laliberte, Richard. "Where Is the Money? How to Control Electronic Spending." Family Circle. 2010. (June 12, 2010)http://www.familycircle.com/family-fun/money/control-electronic-spending/
- McWhorter Sember, Brette. "Create a Family Budget." San Diego Family. 2008. (June 12, 2010)http://www.sandiegofamily.com/component/content/article/389
- Cohen, Marisa. "The Money Pit." Parents. 2010. (June 13, 2010)http://www.parents.com/parenting/money/family-finances/the-money-pit/
- Sahadi, Jeanne. "Marrying Your Money." CNN Money. Feb. 8, 2002. (June 13, 2010)http://money.cnn.com/2002/02/08/saving/q_couples/