Building a Budget for Financial Health

Building a Budget for Financial Health

building a budget

Budget Basics

Have you been talking about building a family budget, but aren’t sure where to start? Sometimes it’s good to start with the basics, such as the basic outline for a budget and the categories you want to include. Here are some tips to help you when building a budget for your family.

Income

The first place to start in the outline of your budget is with your income. There will be some estimating here, no doubt; but make sure it’s estimation, not dreaming, say experts. The income area of your budget is not the place to write down ideals. Simply take a look at your net income over the last three months and estimate an average monthly income. Or you might have income that changes very little month-to-month; it should therefore be pretty easy to figure out your monthly income.

Expenses

Your next category should be expenses. It’s good to include enough detail that you have a grasp on things, but splitting your expenses into dozens of little categories will probably only frustrate you. Try to make your categories fairly general – “entertainment,” for example, is a more general category than “computer games, movies, cable, and DVDs” listed as separate categories. There will probably be more estimation here than in the income category.

As you break down your expenses into understandable categories and numbers, remember that charitable giving or any giving away of money should be also listed as an expenditure.

Actual Expenses

Estimation gives way to “real” numbers when you write down your actual expenses during the month. This is the last section of your budget plan. Keep a running tally of your expenses for several months, and then look at where you are.

Building a budget that works for you takes time, but is certainly well worth it for your peace of mind and financial health.

Some Basic Budgeting Principles

In budgeting, there are some principles that are considered basic. Keep these in mind and budgeting will be much easier.

1. Distinguish between wants and needs.

This can be a hard one, but it’s vital for a budget to function properly. Beware of convincing yourself that a want is a need when it isn’t – you may just be trying to find an excuse to buy the item. Real needs are things like clothes, food, and shelter; but designer clothes, gourmet food, and a palatial dwelling are more like wants!

2. Expenses should not exceed income.

You may find yourself surprised the first time you do a budget and discover that you actually don’t make enough money to cover your expenses. If you discover this, you need to look carefully at your income section and see where you can increase it, and look just as carefully at the expenses and see where you can make cuts.

3. Get the whole family on board.

The more inclusive your budget is, the more likely it is to work well for your family. Include every family member who is old enough to understand. A budget affects everyone, and it’s a good idea to listen to input from other members of the family.

4. Leave some room for luxuries.

Some budgets are so tight that it may seem there’s no room for any luxury. But if you get a bit creative about what constitutes a luxury, you will probably find you can in fact afford some kind of privilege or luxury.

5. Be patient!

It takes several months for a budget to sort itself out and become habit. There will be bugs that need to be worked out. Understanding this can help you stick with it as it needs tweaking and adjusting.

Building a budget that works for you takes time, but is certainly well worth it for your peace of mind and financial health.


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  1. Pingback Saving Money for Financial Health - NormaEsler.com

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