Start the Year Off Right

Revisit the Family Budget

While many people look at a budget as something that restricts spending, it will actually give you the freedom to accomplish your financial goals. Without it, you’re likely to waste money on things that aren’t in line with your priorities. Use it as a guide to keep you on track financially.

Now that you’ve tracked your spending, you have already completed the first part in creating your family’s budget. Your next step is to assign categories to each expense. Each household will have slightly different categories, but a typical one could be as follows:

Income:

Wages
Other

Expenses:

Mortgage
Insurance
Utilities
Car payments
Food
Transportation
Clothing
Savings contributions
Childcare
Recreation and entertainment
Medical and Dental
Home and auto maintenance
Vacations
Other

To complete your budget, allocate a certain amount of money to each category, making sure the right column (expenses) doesn’t exceed the left column (income). Once you devise your budget, you may find that you’re coming up short of cash. Assign priorities to each thing you’d like to accomplish so that you can make a clear decision about what is most important to you. Budgeting is a valuable skill for kids to learn as well. It teaches them that if they spend too much in one area, they are going to have to cut back elsewhere, so be sure to include them in the process.

The best budgeting system is one that is easy for your family to follow, whether it’s the old-fashioned envelope system or something computer generated. Don’t try to force your family into a system they don’t understand or isn’t easy to use. The biggest key to your success is finding a system that works for you.

Software programs like Quicken or MS Money help make budgeting easy for many families. These programs offer great features that allow you to graph and chart progress; they can even connect with your online banking platforms and help improve your credit score. Chances are there is one preloaded on your computer.

Easy Tip:

If you’re not computer savvy, the envelope system still works for many families today. How it works: Grab an envelope for each category within your budget. Inside, place the amount of cash that your budget allows each month. Once the cash is gone, you’re done.

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Other articles from this issue:

• Create a Family Mission Statement
• Schedule Important Things First
• Organize
• Purge
• Maintain
• Determine Your Financial Goals
• Re-evaluate Expenses
• Revisit the Family Budget
• Simplify
• Make Financial Records and Information Easily Accessible
• Savings on the Road