(Link to the spreadsheet at the end of this article)
In a relationship, the misunderstandings and stress that money matters bring can cause conflict. That is why creating a monthly family budget is a very useful tool. It helps to control the history of your spending, as well as analyzing how you use your money, identifying areas of excessive spending, and where you can save.
A monthly budget is a great way to organize a couple’s finances because it brings before you the basic information of your money trends in a simple and fast way. All your finances are summed up into a map which can only show a direction when the numbers come together.
But where to begin?
It’s easy to elaborate a family budget in 4 simple steps.
1. THE REVENUE
All the money that comes in. It can be a fixed income such as your salary, or different variables such as commissions and sales. If you do not know the exact value until you receive it, you can work with an estimate.
2. ONGOING EXPENSES
Ongoing expenses are those which happen regularly and remain at a relatively constant value, for example, water, light, phone, condominium, food, gas, mortgage or rent etc.
3. CHANGING EXPENSES
They are expenses which occur frequently but their value is not constant, some months it can be a considerable amount while others the sum is less or zero, for example, leisure time, trips, concerts and repairs, etc.
Once you have inserted the information for 1 to 3, we can subtract all the expenses from the revenue.
If the balance is positive, this means that there is room for investment or savings.
A negative balance is a warning sign which means you have to do something quickly to change the outcome.
If the value is void, then it is necessary to identify the areas which need an adjustment of expenditure or an increase in revenue.
The couple should sit with pen, paper, bank statements, and calculator in hand etc. Gather all the information on the family budget as it is explained above. From there, you should update the information at least once a month, preferably close to the end of the month, keeping as an objective that you are evaluating how much you spend, your income and you are identifying how you can improve for the next month.
Remember that “budgeting” means estimating. So, the main function of this tool is to estimate the following month so that you can later analyze any backsliding from what you estimated.
It’s common that among the majority of couples one is better than the other in the maintaining this tool. However, if your husband or wife is not the type to sit and do this with you, don’t get annoyed. Simply do it yourself and then present the information to him or her. The important thing is to have the numbers before you, so that they can serve as a basis for decision-making and financial plans that affect the family.
You can use a simple notebook with lined paper, available at any stationary store, to make your budget every month. In the age of technology, it’s much easier to do this in a computer, where the math is done automatically. Some banks provide this tool for their clients. Either way, here is an example of a spreadsheet for a family budget, using Microsoft Excel. You can download it and adapt it to your situation.
Making a family budget is not rocket science. But it’s a great way to remember the rule of economics: spend less than you make.