5 Keys to Develop an Effective Family Budget (2024)

When you think of budgeting, you might think of phrases like “cutting back” or “trimming the fat.” Sounds a bit like going on a diet, right? You can’t seem to help feeling like somehow you’re going to be deprived or restricted in some way. But you move forward anyway because you know that being in control of your finances is an important part of living a healthy lifestyle. Whether it’s a diet or a budget, you have to work to find the right recipes that work for you and your family. If you’re stuck on how to develop an effective budget, these steps will help you get started and remain “compliant.” In today’s post, I’m going to shed some light on a few ways that you can simplify budgeting and set your family up for financial success.

How to Create an Effective Family Budget

1. Track and evaluate your spending

The first step in creating your budget is knowing where your money has already been going. While your large, recurring expenses are obvious (eg. mortgage, car payment, utilities) you may not have an accurate picture of the less predictable expenses such as groceries, clothing, or entertainment. Then, at the end of the month, you may be left wondering why the bank account balance is so low.

Get to know your numbers! For the next 30 days, make an itemized list of every single expense regardless of how large or small. Write it all down. Did you make a pit-stop for a smoothie today? Write it down! Use a tracking method that will work for you. Maybe for you, it’s a simple notebook or just writing down your expenses in your planner. If you need help to organize, there are a few tools that you can use to help make tracking a breeze. Here are some of the most popular options to choose from:

• iReconcile
• Mint
• MoneyBook
• Personal Capital (Whole Family Top Pick!)

Another strategy to simplify your tracking is to use one dedicated form of payment for all of your expenses so you can see in one snapshot where everything has been going.

After tracking your expenses for a month, you should have a pretty clear idea of your expenses that may not have been obvious when you weren’t paying attention. This will help you to recognize areas where you can cut back.

2. Set goals

You have probably been setting goals your entire life. Weight loss goals. Career-related goals. But have you ever really sat down and set goals for your budget and savings? What level of income or savings would make you feel secure financially? Would being debt free put your mind at ease? Perhaps having a certain amount in your “rainy day fund” or your 401k would give you a sense of financial security. Would you like to take your family on a nice vacation each year without accruing debt to do so? Or maybe you simply want to rest assured that your kids’ college will be covered when that time arrives. Get the family on board too! Set your own individual goal, but also goals that the whole family contributes to developing and buys into helping to keep everyone on board with the big picture.

Whatever your goals are, setting them and writing them down clearly will help you to achieve them. Keep them somewhere visible. You might write it on a colorful piece of paper and put it on your refrigerator or create an entire family vision board where one of the elements is your financial situation. Keep your goal front and center and this will help you to move closer towards achieving them every day.

3. Create the budget

Okay, this part may seem a little intimidating but don’t let it scare you. All of the hard work you’ve done thus far has set the foundation to create the family budget.

In order to simplify this, it helps to think that you simply have choices to make when it comes to your spending. Small daily or weekly decisions can add up to huge results when it comes to meeting your goals, and that’s what the budget is aimed at doing; helping you to just make daily or weekly decisions that align with your overall goals.

If you’ve looked back at your 30-day spending assessment and realized that you’ve been spending more than you’ve been earning, now is the time to evaluate where your money has been going. Where can you cut back? What choices can you make differently so that you’re not left feeling like you’re behind the 8 ball and over-extended financially?

Another thing to keep in mind is your priorities. What can you absolutely not live without? Do you need more room in your budget to buy healthy, organic groceries? Then putting this as a priority will mean that you have to cut back on other expenses, right? Look at places where you can cut back? Do you have subscriptions that you barely use? Eliminate them? Can you cut back on your cell phone or cable bill? Call the companies to negotiate better rates.

Once you do a careful review of your expenses, you’ll see places where you have been spending unnecessarily.

4. Stay on track

Developing a budget is key, but having a plan to monitor and stay on track is what will ensure your success. So develop a plan to monitor your progress regularly. You may wish to review your budget each month; review your spending and compare this to your goals. This is not an all or nothing process so if you fell off trackfor one month, know that you have room to make adjustments the next.

Last thing

Developing and sticking to a budget can be tricky. If you need some hand-holding, consider reaching out to a financial counselor or advisor, or become familiar with personal finance sites like Quicken.com or Mint.com which offer free tools and resources. Start taking control of your family finances by knowing how to create a famili budget and and a plan for your family’s financial future.