How to make a family budget?

Knowing how to make a family budget can be really useful for managing expenses and home accounting in maximum efficiency.

Spending the right amount each month for necessary activities and for some whim and, at the same time, managing to save is often a difficult task. In quite critical contexts such as those of recent years, with inflation that has eroded a good part of purchasing power, having a family budget scheme has become really necessary.

Managing a family budget means having control of your finances and knowing your income and expenses in detail to optimize savings and achieve personal and family financial goals.

Below, a short guide on how to make a family budget.

What is a family budget?

The family budget is a financial planning tool that keeps track of all income (such as salaries and other earnings) and all expenses (fixed, variable and unexpected expenses) of a family.

The aim is to have a clear vision of the economic situation to better manage available resources, avoid debt and plan for the future.

An organized and controlled family budget helps you always be aware of your household expenses, avoiding waste and identifying potential savings.

A simple sheet of paper or a notebook is enough to track monthly expenses and income, but using computer tools such as the Excel program it is even easier to calculate how much and what you spend on and the money you can save to accumulate a real "nest egg".

How to Make a Family Budget?

To make a truly efficient family budget you need to follow at least four crucial steps:

• Know your income: write down all your monthly income sources, such as salaries, bonuses, single allowance, food stamps and other sources of income. This will give you a clear idea of how much money you have available each month.

• List your expenses: divide your expenses into categories such as housing, groceries, transportation, entertainment, etc. Differentiate between fixed expenses (mortgage, rent, bills) and variable expenses (food, clothing, entertainment).

• Apply the 50/30/20 rule: this rule suggests allocating 50% of your income to necessities, 30% to non-essential expenses and 20% to savings or debt payments.

• Monitor and review: Check your budget regularly to adjust for any changes in your income or expenses and to ensure you stay on track with your financial goals.

Specifically, it is very important to correctly and comprehensively divide up all household expense items, without leaving out any income and paying attention to the difference between how much you earn and how much you spend in the month.

For optimal household accounting management, therefore, family expenses must include at least these categories:

• Home (mortgage/rent, bills, maintenance);
• Food (daily shopping, bars, restaurants);
• Cars and transportation;
• Personal care (hairdresser, beautician, clothing);
• Health (medicines and medical visits);
• Hobbies;
• Gifts;
• Unforeseen events

The column dedicated to income of a family budget cannot be missing:

• Income (salaries and/or pension);
• Real estate income (rents, etc.);
• Financial income (interest on government bonds, stock dividends);
• Refunds;
• Donations;
• Bonuses;
• Gifts;
• Inheritances

To keep track of every monthly income and expenditure, with the expense and income items clearly highlighted, you can use an Excel table. In general, an Excel file offers flexibility and the possibility of completely customizing the budget, but requires a basic knowledge of the formulas.

The personal finance apps available are another possibility for managing family accounting, as they are easy to use, offer automatic features such as categorizing expenses and synchronizing with your bank accounts.

The Benefits of a Family Budget

Why make a family budget? There are several benefits to having an updated family budget with income and expenses, including:

• having a more peaceful state of mind and living without anxiety about managing accounting;
• planning future expenses and leisure activities;
• saving more assiduously;
• creating a family treasure trove for emergencies;
• being aware of monthly and annual waste

Finally, it is advisable to review the family budget at least once a month. This allows you to adjust expenses based on changes in income or to plan in light of unexpected expenses. A periodic review is also an excellent opportunity to check progress towards financial goals already set.

Original article published on Money.it Italy. Original title: Come fare un bilancio familiare?