Preparing a family budget doesn’t have to be difficult. It is an important tool that will help you to understand –
- where your money is being spent,
- ways to better manage personal finances, and
- how to save cash to meet your financial goals (including saving to invest for longer-term goals).
Following are some expert tips to help you in preparing a family budget and start saving –
Write down what you spend your money on
When thinking about organising a family budget, start with finding out how much money you spend. An important aspect here, is to understand what it buys each week.
It is a good idea to keep a diary of all your expenses for a month. This will give you a rough idea of where the money is going! For starters, analyse your credit card spending and ATM withdrawals and account for everything spent over the past year. If that is too daunting a task, analyse a select range of months to provide a reasonable guide.
A documented budget will help you take better control of your money and give you tips on where savings can be made.
Set a time frame for your budget
Decide on a time frame for your budget depending on the financial goals you’d like to achieve. This could be a weekly, monthly or a yearly plan. In most situations an annual budget is preferable. It is common for the level of detail to vary between the first months of the period and those later. The earlier months likely to be in more detail than the later months.
Estimate your family’s income
Estimate your weekly, fortnightly, or monthly wages (after tax) plus any other income that you regularly receive. Also include money such as
- bonuses,
- income from investments (including dividends from shares, interest on ‘bank accounts’;
- rent on properties held; and
- government benefits and payment entitlements.
Analyse your family’s living expenses
Living expenses are best divided into two different categories for your budget –
- those that are essential (your needs) and
- those that you like to have (your wants).
The essential costs to list in the budget will include housing (home loan repayments, insurance, maintenance), utilities (rates, electricity, gas, water), transport (public and/ or own vehicle), food, education, medical expenses and ‘unavoidable’ family special-occasion gifts (birthdays, anniversaries, festive occasions).
Your wants are goods and services that you like to have but are not required to live, such as –
- extra-curricular activities for school-aged children,
- takeaway food,
- family outings to special events (theme parks, movies, theatre etc)
- a coffee at work,
- Pay TV and
- gifts for non-family situations.
Calculate the difference between your total income and expenses
If you have money left over, the surplus money could be saved to help meet longer-term financial goals. Goals such as purchase of assets, retirement planning, replacement of motor vehicles etc. readily come to mind.
If you have a deficit – “in the red” – it’s time to change your spending habits – and re-work your budget!
One of the easiest ways to trim your budget and to save money is to stop buying any unnecessary “extras” that you’ve identified. (We have had clients who have discussed the family gifting situation and set limits on amount to be expended for those festive occasions and birthdays.)
Regularly update your budget
It is a good idea to review your budget against actual expenditures on a regular basis (and at least annually) – especially if circumstances have changed. For example, you might get a pay increase, buy a home, or there may be an addition to the family.
TIP!
There are lots of free budget planners online that you can use to help you sort out your finances and get your household on track to save money. Kidspot recommends: St George’s free budget planner.
We at Continuum Financial Planners also find the St George tool helpful. However, for more detail and control, we also recommend using the Microsoft Excel ‘Personal budget worksheet’. This is available from Microsoft Online (which can be accessed free via a search from a newly-opened Excel spreadsheet).
Need help preparing a family budget
The team of experienced, qualified financial advisers at Continuum Financial Planners is available to assist you in the development of your personal/ family budget. To arrange a meeting with one of the team:
- phone the office (on 07-3421 3456), or
- at your convenience, use the Make A Booking facility at any time to arrange an appointment.
Thought leadership for the above article was from sources including MoneySmart. It has been copied and modified to provide additional functionality to our readers.
(We originally posted this article in March 2012. It has been occasionally refreshed/ updated, most recently during November 2024.)