Back to Basics: Creating an Effective Family Budget

In today’s tough economy, many families find themselves looking for ways to save a little extra money. It’s common for people to set up a budget, but it’s a lot harder to create one that you can stick to for the long-term.

The key to good budgeting is creating a plan that you can follow over a long period of time, so use moderation and sensibility when you create your budget plans.

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Follow these simple techniques to create an effective budget:

Break down your spending habits

If you know what you and your family spend money on, then you can effectively figure out where you should be making cuts. Break down your spending into four categories: necessities, bills, savings and recreational spending. Add up what you need to spend every month, and designate a portion of your income to every category.

Slash nonessential expenses

Look over the budget you created. When you have everything written out on paper, it’s easy to figure out where you can save the most money. Look at your recreational spending, and try to get that number down as low as you possibly can. It’s not fun, but a temporary cut in recreational spending will get you to where you need to be financially.

Financial experts say that redirecting your “fun” money towards your debts is the quickest way to financial freedom.

Be honest

Take a good look at your numbers, and make sure to be honest with yourself. It doesn’t make sense to pretend that everything is fine when it isn’t. When you are honest with yourself, you can find areas that need to be cut back on. Your budget is a helpful tool. Make sure to use it to make the proper cuts in your spending.

Prepare yourself

Always keep emergencies in mind. You never know when you are going to need extra cash to help you out of a jam. When creating a budget, save some extra money for emergencies, holidays, birthdays and one-time expenses.

When you put money away for special occasions, it pads your savings account. If you don’t use it, then you end up with extra money that you didn’t originally think you were going to have.

When you create a good budget, you set yourself up for success. If you revise it on a regular basis, you can quickly figure out where you are wasting the most money. Eventually, you’ll figure out how to save money without making extreme cuts. When you take it slow, you make it a lot easier to stick to the plan you have created.

For more information on creating a family budget, visit D. Thode & Associates Inc. or other qualified financial planning company.