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How To Set Up And Run A Successful Family Budget

Is budgeting only necessary during hard times?  The word ‘budget’ brings about thoughts of a struggling business, a job loss or a hurting economy.  With a reputation as an unpleasant practice only undertaken by those who are suffering financially, budgeting brings to mind visions of stretching every penny and cutting down any excess costs or fun activities.

Women also tend to think that they are bad at budgeting due to the ‘fire-fighting’ nature of family spending – new childrens’ shoes, a plumbing crisis, it seems never ending.  Think again!  According to a Halifax survey in December 2011, women are better at saving than men despite earning less.  The Halifax Savings Report found that women typically have £7,981 put aside, or 40% of their average earnings, compared with a figure of £7,657 for men, accounting for 23% of their typical salary.

Budgeting is simply a process which helps you to break down your income and spending to use your money more wisely.  By tracking the money coming in and going out you can achieve the best for yourself and your family.  In truth budgeting doesn’t require any cuts to be made at all.  It can give you a better idea about your current situation so that you can make better decisions in the future.

Better decision making sounds like a good idea, but how do you actually go about budgeting?

How to budget

Firstly you need to find out as much as possible about how you are spending your money currently.

  1. Find a template that suits you.

TOP TIP: The Money Advice Service http://www.moneyadviceservice.co.uk is a completely  free service provided by the Government, and it has a budget planner tool which should not take more than 30 minutes to complete.

Alternatively, for a 30 day free trial of budgeting software try https://www.xero.com/personal  Xero is an easy way to track your personal spending habits and savings goals and at £24 per year it won’t eat into your budget!

2.  Find bank statements for the last three months, and work out your average monthly income.

3.  Do the same for expenses.  Gather three months of bills, add them up and divide by three to calculate your monthly fixed expenses such as rent or mortgage, utilities and phone, car payment, and insurance.   Add together three months of other monthly expenses, including groceries, clothing, credit card expenses and cash outlays. Divide by three and add the result to your monthly expense total.

TOP TIP: You make the rules!  What one person may see as a luxury another person may see as an essential.  Keep a perspective on things that are important to your family, otherwise you may find that the budget backfires (secret takeaway pizzas while you are at your weekly book club instead of that uninspiring budget meal!)

4.  Work out how far away is your current spending from your ideal budget, and how much will you need to economize?  Don’t make life too difficult, look for opportunities to reduce spending and develop a plan to cut back spending in specific areas.

TOP TIP:  If you do want to use your budget to save money, have a goal in mind eg a savings goal or a family holiday, it should be specific and should have a timescale. How much do you ideally need to put aside each month to achieve your goal?

5.  Track your income and expenses monthly to evaluate how the plan is working, then fine-tune to produce the desired results.

TOP TIP: Advance planning is key to good budgeting.  For example, if you always buy a coffee on the way to work, why don’t you invest in a coffee flask mug and making the coffee at home?  If there is a bestseller novel that you would like to read, have you thought of reserving it online at your local libray?  Or swapping books with friends?  Reading newspaper instead of a magazine?  Make a shopping list for groceries, and try to stick to it!

For more advice, tips and tools try www.savvywoman.co.uk

The key to success with budgeting is simply implementation!  Use your plan and stick to it.

Good luck!

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