Many say that money is like water – quickly flowing nowhere. If you can’t remember what you spent an impressive amount on, it’s not clear where the salary goes and why it ends in just two weeks, you can’t save up on the desired thing or vacation, it’s time to start a careful calculation of your income and expenses. Family budget planning is the first step towards fulfilling your material desires.
1. The calculation of the family budget will help you find out long-term goals and work in a given direction. If you drift aimlessly, scattering money on every attractive item, how can you save money and go on a long-awaited vacation, buy a car or make a down payment on a mortgage?
2. The table of expenses of the family budget sheds light on spontaneous expenses and makes us reconsider our buying habits. Do you really need 50 pairs of black high-heeled shoes? Family budget planning makes you prioritize and reorient toward achieving your goals.
3. Illness, divorce or job loss can lead to a serious financial crisis. Emergencies happen at the most inopportune moment. That is why everyone needs a reserve fund. The structure of the family budget necessarily includes a column of “savings” – a financial pillow that will help to stay afloat from three to six months.
How to properly distribute the family budget
A few practical rules for planning a family budget, which we will provide here, can serve as an approximate guideline for making decisions. Everyone’s situations are different and constantly changing, but the basic principles will serve as a good starting point.
Elizabeth and Amelia Warren, authors of All Your Worth: The Ultimate Lifetime Money Plan (translated as “All Your Welfare: A Main Money Plan for Life”) describe a simple but effective way to budget.
Instead of dividing family expenses into 20 different categories, they recommend dividing the budget structure into three main components:
- 50% of income should cover basic expenses, such as payment of housing, taxes and purchase of groceries;
- 30% ¬¬– optional expenses: entertainment, going to cafes, cinema, etc .;
- 20% goes to pay loans and debts, and also deferred as a reserve.
80 to 20 or Pareto Rule – A variation of the previous rule. 20% of all revenues to the family budget should be used to pay debts and create a financial “pillow”, 80% – everything else.
These rules of thumb can and should preferably be adjusted to suit your actual situation. Below you will find an example of a family budget in the table, which will serve as the basis for drawing up your own plan.
Rule 3 – 6 months
You must have on hand or a deposit sufficient for a family to live for three to six months. In case of dismissal, accident or illness, the “safety net” will keep you from making desperate decisions, will give you the opportunity to look back and find ways out of the circumstances.
How to make a family budget
Planning the structure of expenses and incomes is not at all a difficult and tedious task, as you might have thought. There are free programs and apps to help you get started and stick to your plan.
- A lined notebook and pen is the first thing that comes to mind when we think about how to calculate the family budget.
- Download the family budget table in Excel for free in standard Microsoft templates and adapt it to your own needs.
- Applications for smartphones – a good option to immediately enter all payments into the program’s memory, you just need to select the utility that suits you. Crap, Coinkeeper – convenient services for tracking and planning expenses.
We offer guidance on steps – how to make a family budget for a month based on a template in an Excel spreadsheet that you can adapt for yourself in a few clicks by downloading the document below.
As a rule, the income column includes:
- salary of the head of the family (indicated by “husband”);
- earnings of the chief adviser (“wife”);
- interest on deposits;
- social benefits;
- part-time jobs (private lessons, for example).
Expenses are divided into constant, that is, constant: fixed tax payments; home, car and health insurance; fixed amounts for internet and TV. This also includes those 10 – 20%, which must be postponed for unforeseen cases and the “rainy day”.
Variable cost column:
- medical care;
- spending on a car;
- payment for gas, electricity, water;
- personal expenses of the spouses (recorded and planned separately);
- seasonal spending on gifts;
- contributions to school and kindergarten;
- expenses for children.
Depending on your desire, you can supplement, specify the list or shorten it by enlarging and combining the items of expenditure.