Unless you are one of the very rare and fortunate few, you probably need to live on a budget. Most likely, there is a limited amount of money coming into your household each month and many bills that need to be paid. Sometimes, the trickiest part of living within your means can be setting up your budget, but without a plan, it can be easy to fall short on your obligations. It is well worth the time to make a family budget so that you can live well now while planning for your future.
Determining Your Income
The first step to making a budget plan is to determine how much funds you have at your disposal each month. Simply, you can’t decide how much you can afford to spend if you don’t have a clear idea of your income. If your salary is consistent each week, simply take your weekly salary and multiply that amount by 52 to get your annual income. Take the annual income figure and divide it by 12 to determine your monthly salary. If your income varies from week to week, as is often the case with people who work on a commission basis, take an average weekly salary for the past three or four months and use that amount. It won’t be quite as accurate as if you had a more consistent income, but it will give you a pretty good idea of what you have to work with.
Fixed and Flexible Expenses
Next, determine your fixed expenses – those that are the similar each month and that you have already made a commitment to pay. Examples of fixed expenses might include mortgage or rent, car payment, utilities, insurance, and tuition.
Flexible expenses are those that although a regular part of your monthly budget, are somewhat under your control. Groceries are a good example of a flexible expense. Although you certainly must purchase food to feed your family, you have a bit of control in how much you choose to spend. By shopping sales and choosing wisely, your grocery bill can be trimmed considerably.
Getting To The Bottom Line
Once you have determined your income and regular expenses, take a look at how the two figures compare. Ideally, your income will be comfortably higher than your expenses. For families, it is not uncommon for the two figures to struggle for dominance. Sometimes, living with a budget can mean making some hard choices.
Wants vs. Needs
If you are having trouble making ends meet or saving for the future, it may be time to commit to making some difficult financial cuts. Although food and housing are needs, most families have some expenses that are meeting their wants, but are not truly necessary. Cable television, fancy clothes, restaurant meals, and theatre tickets are all things that, when funds are limited, we can do without. Each family has their own ways that they can trim their budget, but most can cut back a little if they take a good look at where their money goes.
One of the best ways to get a realistic picture of just where your money is going is to keep a completely accurate accounting of every single expense for full month. Not just the bills, but every cup of coffee and newspaper that gets purchased. Often, much of our money is gone with little or no thought to where it is going. By making a commitment to keeping track of every expenditure, you will be surprised at just how much money gets “wasted” every month. We all enjoy the little extras, but often, when we realise just how much of our pay gets spent on them; we decide which are worth the expense and which we can easily do without.