Thursday, March 20, 2008

The Family Budget: Making it Work

I confess, I'm a bit of a nerd when it comes to money. I like to have a neat family budget, with all bills, spending categories and income sources duly noted. I allocate the money, my husband looks it over, and together, we try to stick to our family budget each month. Oh, I wasn't always this way. In fact, I'm still paying off the credit card debt we incurred before we read Dave Ramsey's Total Money Makeover book.

I look back in annoyance with my old ways of handling money and the cavalier way we added so much unnecessary debt to our lives, but I try not to dwell on it. Following Dave Ramsey's suggestion, we now make a spending plan each month, a “zero-based” budget. The amount going out has to equal the amount coming in, with a net of zero. Yes, you still save money and even invest (when debt-free) but that is part of the family budget and counts as outgo.

As a work at home mom (WAHM), a careful budget is especially important because I want to make sure the time I'm spending earning an income is going to good use. Knowing how precious my time is, wasting money on things we don't need bugs me more now than when I had an office job and no kids.

So how do you make a family budget friendly enough for a skeptical spouse and reluctant teenagers? Start by getting your spouse on the same page so you can tackle the rest of the family as a team. Make some time each week to discuss finances with your husband. Try these resources together:

*My Total Money Makeover

*Financial Peace University

*The Envelope System

With your spouse, plan out a family budget you both can live with. Allocate the set bills first, as that is easy to do (your monthly housing and debt payments should be consistent, and use the average for fluctuating electric bills and the like). Next, your disposable income. Include:

  • Food (estimate $100 per person per month to start)

  • Transportation (gas & oil, tolls, bus fares)

  • Clothing, shoes

  • Tuition, dues, subscriptions

  • Household (cleaning products, repairs)

  • Extra money (gifts, personal, etc.)

If you find your outgo exceeds your income, you need to Earn Extra Money. Also check out How to Save Money and Get Out of Debt.

If you have older children, it's time to get your teens on board. It's essential that you be open with them and ask them to pull together as a teem to make the family budget work. Older teens with jobs may need to pay for their own gas and clothes and even contribute something to the grocery budget, especially if you and your spouse are trying to pay off debt and get finances in order. Younger teens and children can help with extra chores if parents will be working overtime or from home to increase income.

What successes--or pitfalls--have you experienced with a family budget at your house?

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