How to Create a Family Budget

Now that we're parents, most of us can't spend what we used to. (Your monthly diaper budget alone? Yikes!) Now more than ever, we need to be consciously saving money. Think of your earnings like a squirrel thinks of acorns: Do you have enough to survive on? Do you have any stored up in case of stormy weather?

I hear ya: It's dull and sometimes depressing to create a family budget, but this is one of those chores (like cleaning the bathroom) that needs to be done. And once it's completed, you'll feel accomplished and relieved. Knowing where your money goes every month and seeing what's out of whack in your spending can give you a clearer picture of how you can live within your means and still have a good quality of life.
Here's how you create a budget:

• Gather up your receipts for this one month as well as all your monthly bills.
  
  
• Tally the receipts into categories: Housing, transportation, food, utilities, extras.
  
  
• Head to my Budget Calculator to plug in your numbers.
  
  
• See how you measure up. If you use my budget breakdown, your monthly income should be roughly divided into these percentages:
  
  
  • 30 percent housing (mortgage, lease, taxes, insurance)
    
    
  • 18 percent transportation (gas, insurance, maintenance, parking, public transportation)
    
    
  • 14 percent food (plus toiletries and daily needs)
    
    
  • 11 percent Everything else/extras
    
    
  • 10 percent debt
    
    
  • 10 percent savings
    
    
  • 7 percent household (energy, phone and cable bills)
• See where your budget is out of whack. For example, if you're spending 45 percent of your take-home pay on your housing expenses (that's your mortgage or rent plus home insurance and property taxes), is there room in your budget for everything else? Or if your debt is 20 percent or even 30 percent of your income, you may realize that paying that off takes priority over that big vacation.

Following the acorn metaphor, if you stick to spending only what you have in your "pile," this will set your family up to afford all the demands on your money, without having to borrow in order to "feed" your budget! So say hello to budgeting, Mr. & Mrs. Squirrel!

Get more financial advice from our personal finance expert, Carmen Wong Ulrich!