Many families find it quite intimidating to do family budget planning. But it’s not quite difficult to do planning. Here are some simple tips to do family budget planning and ensure that it works Family budget planning should include the total family household income
Family budget planning must start with the income generated in the household. What are the various sources of income? Your salary as well as your partner’s salary will be included in the household income. Other sources of income can be rent income, income from mutual funds, stocks, shares and others. Income generated from gifts or from a will doesn’t really form part of family budget planning. That’s just a one time income, unless you have received trust funds or will get a monthly income from the trusts as laid out in the wills.
Tally the expenses for family budget planning
Next calculate all the expenses that are incurred by the household for the family budget planning. This means that expenses incurred on loan payments, credit card payments, grocery, shopping, tuition fees, entertainment, gasoline and other monthly recurring expenses must be tallied.
Are you saving or are you in debt as per family budget planning?
Do you find that the income runs out, the moment you receive the monthly check. Then it’s time you started on the family budget planning. For the sake of this example, lets say that the monthly family incomes for family budget planning is $5000, while the monthly expenditure is $6000.
Now that you have tallied both the incomes and the expenditures of the month, deduct the expenditure from the income. As per the example we have -$1000. This means that there is a shortfall of $1000. Either you would need to increase the income by $1000 or you would need to decrease your expenses by $1000.
The only means by which you can do so in a short term is by taking loans for $1000. But this is likely to increase your expenditure, since you would have repaid the money along with interest.
Expenses should be divided into fixed and variable expenses for family budget planning
Divide your expenses into 2 categories for family budget planning. The first category should be fixed expenses. These expenses need to be paid no matter what. These would include mortgage payment, car loan payment, utility bills, and insurance amount etc. the second category for family budget planning is variable expenses. These expenses will vary according to your requirement. For example gasoline bills, restaurant bills, some utility bills, entertainment bills can vary. You can have a control over the variable expenses for family budget planning.
For family budget planning, if your fixed expenses are $2000, then it means that your variable expenses are extremely high. Try reducing your variable expenses and your family budget planning will start working. For example you could reduce the number of times that you dine out, purchase your groceries at one go etc. You will find a difference in the expenditure that will help you to execute your family budget planning effectively.
Savings from the variable expenses can help your family budget planning
The savings from the variable expenses will also help you tide over with the fixed expenses. The savings can also be used towards planning a vacation or making an investment for the future. You could save towards the loan payment for the college loan. These are the various goals that you could build in your family budget planning.
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