How to Start a Budget for You and Your Family

Without an effective budget, household expenses can quickly grow out of control. Take home income may be less than expected. Variable income, like commissions or overtime, may come up short. Variable bills are higher than expected, and bill due dates come before the money. When these things happen, we end up with overdrafts, credit card balances, stress, and damage to our credit ratings.

Assuming your income stays stable and you aren't locked into an unaffordable house or loan payment, then avoiding these pitfalls largely comes down to the organization. If income or unaffordable bills are a problem than a budget is extremely important. Minimize expenses until you can solve these other problems.

To organize an effective budget, Busy Budgeter recommends starting by using an old-fashioned pen and paper, then switching to a budget app if you prefer working on screen. This allows you to better absorb the lessons and principles of budgeting that are crucial to financial success. Here are the important steps:

Determine dependable monthly income

Tabulate the take-home monthly income for each household member. For people with regular paychecks, this is as simple as dividing yearly take-home pay by 12. Exclude bonuses and other periodic, unreliable income. For people working on commission or freelancers, this can be more challenging. The important thing is deciding on a realistic amount you know you'll make each month at the minimum.

Determine what bills are paid with each paycheck

Avoiding late fees, overdrafts, and credit card balances can be as simple as coordinating your bills with a specific paycheck, so you always know they're covered. For instance, coordinate your rent and utilities with the check you get at the end of the month (so your rent is early) and your car payment and credit cards with the check you receive at the start of the month (so they are also early.)

On the piece of paper beneath your monthly income, write down the dates of your paychecks, for example, the 1st and 15th. Divide the monthly income evenly between the payment dates. Then, below the dates, fill in the bills that will be paid from the check on the 1st and those paid from the check on the 15th. Be sure to include the amount of each bill and the due date.

Grocery budget

We all have to eat, but what we spend to do so varies widely. If you already know, then this part is easy. What may be more difficult is finding ways to cut down the grocery bill. Have you considered stocking up at club stores, buying items like frozen foods and toilet paper from discount stores, and priced items like juices, over-the-counter medicines, home goods, and others at dollar stores? Also, can you spend some time on meal preparation, as opposed to using convenience meals?

If you are unsure of your budget, track it for at least 30 days using a debit card, and save receipts, so you know what you spend the money on. Then, you can look for ways to economize.

Savings

Check your budget for ways to save. For example, can you change out expensive cable T.V. for services like Hulu or Netflix? Are you running the heat too high? How about trying a programmable thermostat? Get creative and find savings.

Once you are saving, make sure to deposit that money into a savings account as an emergency fund. You never know when you will need it, and you don't want to get stuck charging your credit card for miscellaneous expenses like changing a tire.

Now that you have a handle on your budget, check out some of the online budget apps that can make managing your budget fun. With the money you save, you'll be able to afford purchases like a Toyota Tundra or other great vehicle. If you still need some extra money, consider these easy to complete from home side hustles. The extra cash can turn a tight budget into one with positive savings every month.

Budgeting takes time and discipline, but the results are always worthwhile. When you know where you stand financially, planning for the future becomes the clear next step. With the power of budgeting, your financial goals fall into place.

Damien Justus writes in the business, home improvement and real estate spaces, and is very passionate about health, cooking, diet plans and anything that has to do with staying fit.