Budgeting can be a frustrating process. When writing one, it is all too easy to make it aspirational at best and downright unattainable at the worst.
Ideally, a budget should fit your lifestyle. For instance, if you have five children and a spouse, a $100 monthly grocery budget is probably not going to cut it. While it would be nice to spend as little as possible on discretionary expenses, especially when tackling long-term financial goals like paying down debt, you have to craft a budget that’s reasonable – otherwise, it is all too easy to throw up your hands and give up.
Here are our tips for writing a family budget that is conservative, but still attainable.
Nail down your numbers
Before you can set an attainable budget, you need to know, realistically, how much you spend each month on essentials. Tally up your fixed expenses like mortgage or rent, utility bills, and debt payments. These are your “fixed” expenses.”
Next, consider how much you spend each month on non-fixed, or discretionary, expenses. These include items like groceries, meals out, vacations, clothes, and household items. Pull your bank statements from the previous month to see how much you spent. Then, be honest with yourself: How much did you actually need to spend? Did you blow $300 on meals out, when you really did not need to eat out at all? Did you shop at a specialty grocery store when you could have grabbed the same items at a local supermarket? Sit down with your spouse, partner, or a trusted friend to nail down a number that works for your family or household needs but that does not break the bank.
Plan for your long-term expenses
When setting your budget, don’t forget about items that you pay periodically rather than monthly. These may include property taxes, insurance premiums, or professional licensing fees. To ensure you don’t forget these expenses, look through your past statements to see how much you spent on them. Take that amount and divide it by twelve. This is the amount you need to set aside each month to cover these expenses. Add these amounts to your monthly budget, treating them as you would a recurring expense. You may opt to move this money into a separate savings account specifically designated for those bills, or set up an auto-draft so that you are not tempted to spend it.
Make adjustments as needed
Don’t be afraid to make changes. The first budget you create will not necessarily form a blueprint for future budgets you set. Also, keep in mind that there is no right or wrong way to budget. If your budget is keeping you honest when it comes to your spending and saving habits, then it is likely working.
