Set up a family budget
February 2009
A family budget allows you to control your household spending so that you have enough money to pay your bills.
This helps spread the cost of essential expenditure evenly over the year, and means you can plan for holidays, retirement, your children's education and other major outgoings.
If you are in financial difficulties, there is no point in just "winging it" and hoping for the best. Not having a family budget can be a surefire way of getting into financial difficulty.
So how do you set one up? The following are ten easy steps to get you on your way with a new family budget in 2007.
Step one: Work out your average monthly income - gather up three months of pay slips of the wage earners in the house, add them up and divide by three.
Step two: Calculate your monthly fixed expenses such as rent or mortgage, ESB, phones, car repayments and student loan payments. Divide annual payments such as life insurance by 12 and add them to these monthly expenses.
Step three: Look at three months of other monthly expenses, such as grocery bills, credit card expenses, clothing, medical bills and cash outlays. Divide this total by three and add it to your monthly expense total.
Step four: Now divide your expenses into separate lists of essential expenditure (such as mortgage/rent, child care, health insurance), discretionary spending, loan repayments and saving. Consider whether you'd prefer to shift some spending from one category to another.
Decide whether to make minimising costs a goal in your budget strategy. Look at areas where you can cut down on expenses, and draw up a plan to cut back spending in specific areas.
Step five: Work out a monthly budget - and stick to it. Remember to ask yourself whether you need to set aside a sum for unexpected essential spending, such as a leaking roof, car repairs or back-to-school expenses.
Step six: Involve the whole family. Explain why it can be worth economising in some areas to save money for treats. For instance, you may all decide to skip a weekly cinema visit in order to save towards a big family holiday.
Step seven: Decide on a monthly target to save - for example, in a deposit account - then shop around for the best value. Start making regular deposits.
Step eight: Try to get into the habit of reading all your bills on the day they arrive - check for any errors or unusual transactions.
Step nine: Set aside a certain time every week or month to do a regular tot of your income and expenses, review your budget, check how your plan is working and handle outstanding matters. A personal financial software program can make organising your expenses easier, or you could use a simple spreadsheet on your PC.
Step ten: If you have done all this and still find it hard to make ends meet, don't think the problem will simply go away. Look for advice. For example, the Money Advice and Budgeting Service (MABS) gives free advice on debt and money management problems. If you are having trouble meeting large expenses such as your mortgage repayments don't ignore it. Talk to your mortgage provider who will usually try to be as helpful as they can.
Learn more
Read our consumer guide to you and your money
Visit the MABS website
Check for budgeting tips in the Ask About Money online discussion forum