Here’s How to Create a Family Budget You Can Live With

If the word “budget” makes you feel like screaming, running out the door and hiding in the woods, you’re not alone. There’s just something about the word that frightens a lot of people.

That’s too bad because an effective budget can be your best financial friend.

So before you start for the door, calm down and try to make friends with a budget that can help you reach your financial goals.

It’s Not as Scary as You Think

The unknown is always more frightening than the familiar. The unknown quantity is precisely why so many people fear even thinking about a budget, let alone creating one. It might be the fear of how to get started, it might be because they don’t have a clue as to their own financial situation, it might be the idea that “budget” means depriving themselves or any number of other rational as well as irrational fears.

In his blog, Fergus Cleaver explains that it doesn’t matter whether you’re just starting out or getting ready to retire, taking stock of your personal finances now is the first step in taking control of your financial future. How do you get started on the road to financial health?

Step-By-Step Budget Planning

You don’t have to sit down and come up with a budget by midnight. In fact, quite the opposite. The best way to begin creating a budget you can live with means taking your time. As you ease into each step, strategies become clearer and confidence replaces your fear.

Follow these budget creation steps:

• Take a month and track your spending.

That’s it. Live and spend as you normally do. But, as you spend, use a computer or smartphone app or a simple notepad and keep track of every penny.

That includes the “little” expenditures you probably don’t think about much, like your morning latte, parking meter money, restaurant tabs and tips. Anything that comes out of your pocket.

Of course, also include large items, like car, house and utility bill payments. The idea here is to see how much you normally spend each month. Compare what you spend with what you make. If you spend more than you make each month, you’re headed for a financial meltdown.

• Take control of your spending.

Now that you know what you spend, take a long hard look.

Are you really spending $60 a month on lattes? What about that $200 you spend on eating out every month?

Think about how much you’d save each month if you put half of each amount in savings instead. You can live with a latte every other day, right? You could cut back on the number of times you eat out every month, couldn’t you?

The trick is not to cut out everything you love – you’ll feel deprived and fall off-budget faster than you can take a breath – but moderating expenditures and allocating more money toward building a solid financial future.

• Set goals and save.

The goals you define depend on your current situation. Do you have a high credit card you need to pay off? Do you want to save for the down payment on a home? Do you need to save for your children’s education?

Set up a goal and delegate a specific amount toward that goal each month. Set automatic savings contributions up to send money directly to savings. You won’t even notice it’s missing.

Taking control of your finances, budgeting and saving for the future isn’t something to be afraid of. In fact, once you start, you’ll wonder why you waited so long.