Managing something even as minimal as an average monthly budget for a family of three isn’t an easy task. You need insurance policies to help you get through it all along with a good source of income.
For many people coming up with a budget plan to run a household means that we should put an end to all the fun. No more eating out, no more vacation trips, and no more shopping.
However, this should not be the case. Your budget should be flexible enough that you do not have to take loans while also managing things other than basic necessities. A budget basically gives you control over your expenditure and saving.
This is possible primarily when you have a backup plan with appropriate insurance policies. Besides this, there are various other factors that contribute to a balanced family budget.
There is a variety of techniques and strategies that can help you keeping your family budget balanced. Most of them vary with where you stand in life. The budget of a bachelor doing undergrad will vary from that of a retired officer.
However, there are five basic steps that will help you to come up with a budget plan.
1. Set Goals
You should know your goals because they will help you in determining where your money should go. Financial goals can either be immediate or long-range. Immediate goals might include covering bills and buying groceries.
Whereas long-range goals may refer to college fees of your kids or the tuition fees you may need for your post-grad programs while currently being enrolled as an undergrad.
But before you can sort out your goals, you will also have to prioritize them. A long-range goal is tuition fees, but it can also be a trip to the Bahamas next summer. In this case, you have to pick between necessity and luxury.
2. Balance Between Your Income and Expenses
Once you know your financial goals, you have to make a plan that will fulfill the goals. For that, you have to evaluate your expenses along with your income. A good tip for this is to evaluate your income on a monthly basis since most bills vary every month.
Make a record of your monthly income. Add any bonuses or incentives that you receive in that respective month. Then add up your bills and other expenses.
Some parts of the bill will be fixed while some might be variable. So the best trick to sort this out is to make an estimate for these costs.
Once you have both your income and expenses in front of you, you can come up with a plan that may work for an average monthly budget for a family of three or more.
3. Checkbook Analysis
The main aim of keeping a budget plan is to keep checking that your expenses do not surpass your income. Now for this, you have to make sure that you have a way where you can keep a constant check on your finances.
If you use a checkbook, then you can keep track of your finances here. You can also print a bank statement if you use your credit cards. But a checkbook is a good tool to analyze your finances.
4. Check Original Budget
Stick to your budget plan for two to three months. After that, it will be time to revisit the original plan to come up with some alterations.
Once you have an idea about how your expenses and income actually come around, you will see that maybe you have overestimated or underestimated in certain places. In this way, you can correct your already existing family budget plan.
You can also increase your savings by revising your budget plans. It is recommended that your savings should be enough to cover your expenses of six months if you have to let go of your job.
For this reason, it is better that you open up a separate savings account. A separate account ensures that your money is safe. You will not be spending more and managing the budget better this way.
5. Committing To Your Plan
Set realistic goals for yourself. This will help you in staying true to your family budget plan. Making a plan is easy, but following the plan is the tougher part. So make sure that once you get started with planning, you also stick to the plan when it comes to expenditure.